United States General Accounting Office

GAO Report to Congressional Committees

June 1996 ACQUISITION

REFORM

Military-Commercial

Pilot Program Offers

Benefits but Faces

Challenges

G O A

years

1921 - 1996

GAO/NSIAD-96-53

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-271257 

June 28, 1996

Congressional Committees

Faced with substantial funding reductions for defense procurement, the

Secretary of Defense made acquisition reform a top priority of the

Department of Defense (DOD). The challenge for DOD is to maintain

technological superiority and ensure a strong national industrial base

while concurrently reducing acquisition costs. The need for reforming the

defense acquisition system is well recognized; however, acquisition reform

has been an elusive goal for many years. DOD has initiated several major

efforts to implement a commercial-style procurement system that takes

advantage of commercial products and processes and, whenever possible,

eliminates military-unique contracting, technical, and accounting

requirements. The Secretary of Defense said that acquisition reform

initiatives could cut costs 20 to 30 percent.

This report discusses a pilot program1

 entitled “Military Products from

Commercial Lines,” set up by the Air Force with one of its contractors to

make reform a reality. We evaluated the pilot program to determine (1) its

potential for producing the benefits sought through reform and (2) any

barriers to achieving these benefits. We conducted our review under our

basic legislative responsibilities. We are addressing this report to the

committees involved in fostering acquisition reform because it identifies

problems and calls for corrective action that the agency has indicated an

unwillingness to take.

Background The pilot program was undertaken as part of the Air Force Materiel

Command’s Manufacturing 2005 strategy, which envisions a future where

an integrated military-commercial industrial base will ensure the Air Force

access to superior technologies at dramatically reduced costs. As part of

the strategy, the Air Force analyzed key military sectors, including

electronics. It noted that electronic components are pervasive throughout

weapon systems, accounting for more than 40 percent of the cost of

aircraft, 70 percent of air launched missiles, and 80 percent of spacecraft.

Therefore, reducing the cost of manufacturing electronics components

through integrated production would be a major factor in controlling the

costs of all Air Force systems.

1

This pilot is not part of the Defense Acquisition Pilot Program authorized by section 809 of the

National Defense Authorization Act for Fiscal Year 1991.

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To move toward this vision, the Air Force’s Wright Laboratory awarded a

4-year, $21.5-million pilot research and development contract to TRW’s

Avionics Systems (military) Division in May 1994. The goals of the TRW

pilot are to (1) demonstrate that a military-unique product can be

technically redesigned for manufacture on a commercial production line at

lower cost and have equal or better quality; (2) identify barriers currently

in place that limit integrated military-commercial efforts; and (3) transfer

lessons learned in part through a “model” contract for future collaborative

electronics production efforts. The objective is to develop solutions that

are not “contract-specific” or “one-time waivers” but, rather, have broad

applicability to other DOD contracts.

TRW military is scheduled to produce the Communication, Navigation, and

Identification (CNI) avionics components for the F-22 fighter aircraft.

Similar components are used for the Comanche helicopter program. Under

the pilot contract, TRW military has subcontracted a demonstration

production effort for the manufacture of two CNI modules2

 to its sister

division, TRW’s Automotive Electronics Group (commercial division).

While the TRW military division currently assembles electronic modules

by hand, commercial production takes place on an automated assembly

line. Under the pilot arrangement, the TRW military division will assume

responsibility for some government requirements that could interfere with

its commercial division’s production practices. According to the Pilot

Program Manager at Wright Laboratory, the savings achieved by the pilot

will depend partly on the efforts to modify the subcontract between the

two TRW divisions. Greater savings are expected if commercial practices

are used in place of military practices.

The pilot is now in the second of three phases and is scheduled to be

completed in May 1998.3

 Generally, the pilot’s tasks are to (1) compare and

document military and commercial business practices as well as

recommend and demonstrate best business practices that are acceptable

to both government and commercial producers; (2) redesign the modules

for commercial automated production, while meeting the needs of the

F-22; and (3) demonstrate production of military modules on a commercial

line along with commercial products. Thirty of each module will be

produced in late 1996 to validate the design. Based on the results of the

2

The CNI avionics consist of 38 modules. The pilot includes two types of modules—the front-end

controller and the pulse narrowband processor.

3

In phase I, business policies and practices were analyzed. Phase II tasks are to recommend changes to

business practices, implement manufacturing infrastructure changes, and validate the component’s

design. In phase III, production of the component will be validated and results of the pilot transferred

where appropriate.

Page 2 GAO/NSIAD-96-53 Acquisition Reform
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test run, modifications will be made to the modules’ design and the

production line. An additional 60 of each module will then be

manufactured and available for F-22 qualifications testing.

Results in Brief Midway through the TRW pilot, it appears technically feasible to redesign

military components for commercial production. Pilot officials are

confident that if they are allowed to use commercial practices and

policies, they will save an average of 40 percent over estimated military

production costs while also demonstrating that each of the redesigned

modules will meet F-22 requirements. Other potential benefits include

quicker assembly and a lighter weight product. For the long term, pilot

officials envision that lessons transferred from the pilot will help produce

significant savings for future weapon programs that have large electronic

procurements.

Although the pilot will not be completed until 1998, significant lessons

have already been learned. Business practices and policies under

government and commercial contracting procedures have major

differences that must be reconciled to encourage commercial

participation. The pilot has identified a number of government-unique

requirements that may present barriers to the most efficient use of

commercial production lines. Existing acquisition reform measures have

not removed these government-unique requirements. Unless waivers or

workarounds are granted for many of them, the pilot will be limited in

demonstrating that military items can be produced at equal or better

quality on commercial production lines at substantially lower prices.

TRW Pilot Has

Potential to

Demonstrate

Integration Benefits

At the end of phase I, the pilot had successfully completed the conceptual

redesign of the modules to allow integrated production. Integrated

production is now possible through recent manufacturing advances. The

low volume of military electronics purchases does not provide sufficient

economic incentives for commercial manufacturers. Recent advances such

as flexible manufacturing allow integrated production of small lots of

military products with other production lots, thus maintaining a high

utilization rate for the line.

The redesign of the components should comply with the more stringent

requirements for automated production rather than the manual

manufacturing process used by the military. In redesigning the modules,

one of the most significant changes is the use of plastic parts instead of the

Page 3 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

ceramic parts commonly used by the military. According to pilot officials,

cumulative commercial experience with plastic electronic components has

proven them to be reliable in nonmilitary applications. The transition to

plastic is consistent with the need to design for manufacturing and

incorporates more cost-effective materials used by commercial producers.

Further, the redesigned components are expected to be assembled more

quickly and to weigh 15 percent less than their military versions. The next

step is to produce a sample of the modules to validate the redesign.

The pilot modules will be tested to meet F-22 and Comanche requirements,

such as durability requirements of 20 plus years. Pilot officials claim the

redesigned modules can meet all the same functional requirements as the

original design with the possible exception of one condition—a

temperature requirement. However, they believe that additional analyses

and tests will show that this condition can be successfully resolved. If the

pilot program produces avionics modules on the commercial production

line when planned, the F-22 schedule allows for testing and integrating the

modules. According to an F-22 Program Office official, if the modules pass

all ground test requirements, the office can instruct Lockheed Martin to

substitute the pilot components for those produced by TRW military and

actually perform validation and verification of the pilot modules on an

F-22 experimental aircraft.

Potential Benefits Include

Cost Savings

One of the primary benefits of encouraging commercial producers to

manufacture military products is that lower costs result from spreading

overhead over greater quantities and taking advantage of other economies

that come with large-scale manufacturing operations. For example, large

volume discounts can be obtained when purchasing some materials. Pilot

officials currently estimate that producing the modules commercially will

save about 40 percent compared to the F-22 program cost estimates.

About one-third of the estimated savings stems from reduced labor costs.

TRW’s commercial division assembles over 15,000 electronics components

per day, versus the few hundred per year that are manually produced by

the military group. About 20 percent of the savings are expected from

using less expensive materials.4

 Another 20 percent of the pilot savings are

expected to come from reduced administrative costs associated with

statutory and regulatory compliance. Savings from eliminating military

specifications and standards, such as for testing and screening and other

4

For example, the pilot estimated that material cost for one part of the components dropped from $755

according to F-22 estimates to $340 if commercially produced.

Page 4 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

material compliance requirements, make up the bulk of the remaining

estimated savings. The pilot manager emphasized that the projected

savings assumes the contract is modified to remove certain government

requirements, and the estimate may change if requirements are not

removed, or if material costs or the F-22 estimates change.

Expected Benefits Extend

Beyond Pilot

The most important benefit foreseen from the pilot is not from lower costs

for the specific pilot components, but from future electronics

procurement. Even by saving 40 percent of the cost, the projected savings

will not match the $21-million cost of the pilot, nor was this the pilot’s

intention. The payoff will result from applying the lessons learned from

this pilot to future Air Force electronics procurement. According to the

pilot manager, TRW has estimated $126 million in savings by applying pilot

concepts to all F-22 CNI modules. After working through the multitude of

requirements with a profitable commercial company, pilot officials plan to

develop recommendations and a model subcontract that will serve DOD

purposes yet not impede commercial operations. In turn, wider

participation by commercial entities in military production may reduce

military-unique production costs.

In addition, pilot officials see other benefits from demonstrating and

promoting broader integration. DOD may be better able to take advantage

of technological advances developed by commercial firms. For example,

one pilot official noted that although military contractors could also adopt

advanced automated manufacturing techniques, it might not be

cost-effective, given the typically small size of military orders. However,

since the investment in commercial production is spread over a large

quantity of products, it makes good business sense for commercial

companies to continuously incorporate state-of-the-art manufacturing

processes. Other benefits that may occur with integrated production

include more timely production of defense components, greater

competition for defense business from a larger base of commercial

manufacturers, and a greater surge capacity for defense items in the event

of future conflict.

Many Challenges to

Success Remain

Despite the climate of acquisition reform, this pilot program must

overcome many hurdles. These hurdles have primarily resulted from

reconciling major differences in business practices and procedures

between the way the government operates and the way commercial

businesses operate. Acquisition reform initiatives have not allowed this

Page 5 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

pilot to capitalize on technological advances that allow a small number of

military items to be integrated with production at a commercial

manufacturing facility.

Wide Gap Between

Commercial and Military

Practices

The pilot has identified large differences between the contracting and

operating procedures of TRW’s commercial and military divisions. The

pilot program offers a good opportunity for making such comparisons.

Because the two divisions have the same corporate parent, they could

share business-sensitive and proprietary information and, therefore, avoid

some of the difficulties other companies might experience in sharing

information. Based on their findings, the pilot program aims to highlight

areas in the defense procurement system that can be streamlined to

facilitate future collaboration with commercial companies.

Pilot teams, including both TRW divisions, reviewed two sets of

requirements that the commercial group found objectionable. One set of

requirements includes Federal Acquisition Regulation (FAR) and Defense

FAR supplement clauses, and the other set contains technical military

specifications and standards for producing the items. For contractual

requirements, the teams initially identified 55 clauses. (See app. I.) Many

of the requirements targeted by the pilot, such as cost or pricing

information, data rights, and quality standards are the same ones that have

been identified in several major acquisition reform studies and that

commercial firms claim deter them from competing for government

projects.

After the pilot teams analyze the origin and purpose of the requirements,

they will then determine whether action should be taken to alleviate the

defense-unique requirements they impose. This effort is projected to be

completed at the end of 1996. This analysis is also a critical component of

the pilot since a key objective is to develop a contract that allows TRW’s

commercial division to maintain its normal business practices as much as

possible. TRW’s commercial division does not want this pilot to adversely

affect its highly successful commercial business. Unless waivers or

workarounds are granted for many of these government-unique

requirements, the pilot will be limited in demonstrating the benefits of

commercial practices, including the savings associated with high-volume

material purchases.

The difference between commercial and military practices, according to a

pilot report, is often not in the actual compliance with a requirement, but

Page 6 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

in the level of documentation required. For example, TRW’s commercial

division agreed to the FAR clause on affirmative action for Vietnam

veterans because the clause is consistent with standard commercial

practices. However, FAR clause 52.222-37, “Employment Reports on Special

Disabled Veterans and Veterans of the Vietnam Era,” is not consistent with

those practices. This clause requires an annual report on the number of

disabled and Vietnam veterans currently employed—by job category and

location and of the number of new hires by category. TRW said that

several contract clauses repeat requirements imposed by other public

laws, although there is a wide gap between the detailed proof of

compliance the government requires and commercial enterprises’

requirements.

While analyzing the differences in requirements, pilot officials found that

barriers to commercial production are not created by the Air Force alone.

In examining the Lockheed Martin F-22 subcontract with TRW’s military

division, officials noted that the Air Force originated 49 of the 204 contract

requirements and Lockheed Martin added the remainder. For example,

Lockheed Martin added part of Military Specification 2000a regarding

documentation of soldering. To meet the specification conditions, TRW is

required to add a reporting step for defects under the F-22 subcontract

that it believes is unnecessary and incompatible with commercial

operations. DOD officials said they recognize contractors adding detailed

requirements can be a problem, but told us they can do little about it. One

of the lessons of this pilot is that prime contractors need to consider

removing some of their requirements.

Integrated Production Pilot

Has Not Benefited From

Acquisition Reform

Although DOD has actively proposed and implemented acquisition reform

measures, key reform efforts have not helped move the pilot forward. For

example, the revised commercial item definition, intended to streamline

government requirements, does not apply to the pilot components. DOD has

reduced the use of military standards and allows DOD contractors to use

uniform government requirements across a facility, but neither action

benefits the pilot. The Defense Acquisition Pilot Program could provide

some of the statutory relief needed to demonstrate that military products

can be manufactured on commercial lines, but the pilot is not part of the

program.

After identifying an initial list of requirements not typically found in

commercial contracts, pilot officials studied removing some of those

requirements. Rather than approaching each requirement individually,

Page 7 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

pilot officials hoped that if the components could be considered

commercial items as defined by the Office of Federal Procurement Policy

Act as amended by the Federal Acquisition Streamlining Act of 1994, a

number of government-unique requirements could be waived. Pilot

officials reasoned in part that since the avionics components are being

designed, developed, and produced on a commercial assembly line, the

components could be considered “commercial items.”

The Air Force concluded, and we agree, that the components do not

qualify as commercial items because the commercial item definition does

not apply to military-unique items. Thus, integrated production efforts

such as the pilot do not benefit from the act’s definition.

Over the course of this pilot, several other reforms have been instituted

that may support integrated production in the long run, but do not further

the pilot’s demonstration of integrated production benefits. For example,

in June 1994, the Secretary of Defense directed that commercial

performance standards be used in place of military specifications.

However, this directive does not cover all government-unique

requirements and focuses on new contracts. Many contracts for major

weapons systems, such as the F-22, were awarded before the directive

became effective. In December 1995, the Secretary moved to streamline

existing requirements with the Single Process Initiative. This initiative

allows a “block change” approach to modify contracts so that management

and manufacturing processes can be consolidated across all contracts at a

single facility. It does not provide relief for the pilot because it is directed

toward defense contractor facilities.

Congress enacted provisions under the National Defense Authorization

Acts of 1991 and 1996 to allow DOD to conduct pilots to test ways to

increase the efficiency and effectiveness of the acquisition process. The

1996 provisions allow DOD to designate two entire defense facilities that

would operate under the rules that apply to commercial items. Specific

facilities have not yet been authorized. The 1991 provisions permit pilot

programs to be conducted in accordance with standard commercial,

industrial practices, and provides some waiver authority, with the specific

programs to be designated by law. Five pilots were authorized in 1994

under the 1991 provisions. The TRW pilot could show benefits of

military-commercial production under the 1991 DOD Acquisition Pilot

provisions, but it is not part of the program established under the

provisions.

Page 8 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

No Leeway in

Requirements for Pilot

Although the TRW pilot was developed as a result of the Air Force

Manufacturing 2005 initiative, the initiative provided no authority to waive

requirements. From the beginning, the pilot has had to undergo a lengthy

and complex process just to get the contract negotiated for the TRW

divisions to work together. Because of all the defense-unique requirements

that had to be addressed, pilot program officials spent 3 months trying to

negotiate contractual terms and conditions acceptable to the commercial

division. To finally get the subcontract negotiated, the military division

agreed to accept responsibility for complying with government

requirements related to purchasing materials.

To fully demonstrate the benefits of producing military items on

commercial lines, the pilot subcontract must be modified. Under the

existing agreement, the military group purchases materials to reduce the

number of the military requirements passed on to the commercial group.

Yet to take full advantage of the price and quality benefits from large

volume discounts and long-standing supplier relationships, the

commercial division must purchase the materials. The pilot must use

standard procedures to request deviations or waivers from the military

requirements in order to modify the subcontract so that the commercial

division can purchase materials. The standard waiver process requires a

detailed analysis of the original intent for a clause and a justification for

the waiver. Similarly, the new rules for purchasing commercial items do

not apply. According to a Judge Advocate General official, no policy exists

that allows the pilot to be considered anything but an ordinary

procurement.

To move the pilot forward with a streamlined subcontract, pilot officials

also have to contend with an acquisition culture that is resistant to change.

The TRW pilot was initiated by working-level engineers and others at

Wright Laboratory who saw opportunities to actually demonstrate the

advantages of working with the commercial sector. While the Secretary of

Defense’s demonstration initiatives have top DOD support and

congressional waivers, the TRW pilot is a “grassroots” effort. Starting from

the lower tiers, regulatory relief is obtained only by asking successively

higher tiers to take responsibility for waivers to rules or for approving

alternatives to accepted ways of operating. This is a time-consuming

process and involves some risk, yet provides little incentive for approving

deviations to traditional defense business procedures without specific

directions from the highest levels.

Page 9 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

Recommendations This pilot represents a low-risk effort to demonstrate the potential benefits

of designing and producing a military component on a commercial line.

Accordingly, we recommend that the Air Force, in consultation with TRW,

identify those government-unique requirements that prevent the pilot from

demonstrating that military items can be produced at equal or better

quality on commercial production lines at substantially lower prices and

then seek Secretary of Defense waivers. We recommend that the Secretary

of Defense move quickly to waive those requirements within his authority

that pilot officials believe impede the successful completion of the pilot.

Further, we recommend that, where necessary, the Secretary seek

legislative relief from those impediments he cannot waive. For example,

the Secretary could request approval for the TRW pilot to proceed as part

of the DOD Defense Acquisition Pilot Program.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, DOD indicated that it did not

concur with our recommendations, stating the pilot has not identified any

specific roadblock that the Secretary of Defense needs to remove or that

requires a waiver. DOD indicated that (1) providing a waiver for the pilot

would not necessarily accomplish the project’s objective of demonstrating

the feasibility of building military products on commercial lines in the

future and (2) designating this pilot as a DOD acquisition pilot would be

contrary to one of the TRW pilot’s objectives, which is to identify barriers

and then develop and demonstrate business practices to nullify those

barriers.

We disagree that the pilot has not identified specific roadblocks that need

to be removed or that require a waiver. The pilot team, including both

TRW divisions, has identified numerous government unique requirements

that TRW’s commercial division found objectionable. Many of the

requirements, such as cost or pricing information, data rights, and quality

standards, are the same ones that have been identified in several major

acquisition reform studies and that commercial firms claim deter them

from competing for government projects. Unless the pilot can get beyond

these requirements, the pilot will be limited in demonstrating the benefits

of commercial production, including the savings that the Air Force

recognizes are needed in order to control the costs of future weapons

systems.

The intent behind our recommendations is to allow the pilot to move

beyond these well recognized and thoroughly studied barriers so that it

Page 10 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

can demonstrate a better and cheaper way to procure electronic

components for the F-22 aircraft program.

We believe the bottom-up approach taken by the pilot is an important step

in changing the prevailing culture found in defense acquisition. We believe

implementation of our recommendation will enhance the pilot’s chances

for successfully demonstrating that a military item can be redesigned and

produced on a commercial line at significant cost savings—a theme that

underlies the Secretary of Defense’s “Mandate for Change” and the Air

Force Manufacturing 2005 study.

DOD’s comments in their entirety are reprinted in appendix II along with

our specific evaluation of them.

Scope and

Methodology

We interviewed and obtained information from pilot project officials at

TRW, the Wright Patterson Pilot Program Manager, the TRW Program

Manager, Wright Patterson contracting officials, the Judge Advocate

General representative, an F-22 Program Office official, and the Air Force

Office of the Assistant Secretary for Acquisition. We also reviewed

documents such as the pilot contract and phase I contract reports and

early recommendations, the Federal Acquisition Streamlining Act,

implementing regulations, the Defense Authorization Acts from 1991 and

1996, and studies and reports related to acquisition reform. We observed

manufacturing procedures at TRW’s military division.

We conducted our review from September 1995 to January 1996 in

accordance with generally accepted government auditing standards. We

did not independently verify pilot estimates of savings from using

commercial practices, nor did we verify that the clauses initially targeted

by the pilot for possible waiver are impediments.

We are sending copies of this report to the Secretaries of Defense and the

Air Force; the Director, Office of Management and Budget; and other

interested congressional committees. Copies will also be available to

others on request.

Page 11 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

Please contact me at (202) 512-4587 if you or your staff have any questions

concerning this report. The contributors to this report were Katherine

Schinasi, Monica Kelly, Marguerite Mulhall, Gordon Lusby, William Woods,

and John Brosnan.

David E. Cooper

Associate Director

Defense Acquisitions Issues

Page 12 GAO/NSIAD-96-53 Acquisition Reform
B-271257 

List of Congressional Committees

The Honorable Ted Stevens

Chairman

The Honorable John Glenn

Ranking Minority Member

Committee on Governmental Affairs

United States Senate

The Honorable Strom Thurmond

Chairman

The Honorable Sam Nunn

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Christopher S. Bond

Chairman

The Honorable Dale Bumpers

Ranking Minority Member

Committee on Small Business

United States Senate

The Honorable William F. Clinger

Chairman

The Honorable Cardiss Collins

Ranking Minority Member

Committee on Government Reform and Oversight

House of Representatives

The Honorable Floyd Spence

Chairman

The Honorable Ronald Dellums

Ranking Minority Member

Committee on National Security

House of Representatives

The Honorable Jan Meyers

Chairwoman

The Honorable John J. LaFalce

Ranking Minority Member

Committee on Small Business

House of Representatives

Page 13 GAO/NSIAD-96-53 Acquisition Reform
Appendix I 

List of Contractual Clauses Targeted by Pilot

for Review

Clause by category Description

FAR 52.215-1 Examination of Records by Comptroller General

FAR 52.215-2 Audit - Negotiation

Cost or pricing

FAR 52.215-22 Price Reduction for Defective Cost or Pricing Data

FAR 52.215-24 Subcontractor Cost or Pricing Data

FAR 52.215-27 Termination of Defined Benefit Pension Plans

FAR 52.215-39 Revision or Adjustment of Plans for Postretirement

Benefits Other Than Pensions

FAR 52.230-2 Cost Accounting Standards

FAR 52.230-5 Administration of Cost Accounting Standards

DFARS 252.215.7000 Pricing Adjustments

DFARS 252.231.7000 Supplemental Cost Principles

DFARS 252.231.7001 Penalties for Unallowable Costs

DFARS 252.233.7000 Certification of Claims and Requests for Adjustment or

Relief

DFARS 252.242.7001 Certification of Indirect Costs

Delivery and inspection

FAR 52.246-9 Inspection of Research and Development

DFARS 252.225-7009 Duty Free Entry - Qualifying Country End Products and

Supplies

DFARS 252.247-7023 Transportation of Supplies by Sea

Ethics

FAR 52.203-1 Officials Not to Benefit

FAR 52.203-5 Covenant Against Contingent Fees

FAR 52.203-6 Restrictions on Subcontractor Sales to the Government

FAR 52.203-7 Anti-Kickback Procedures

FAR 52.203-9 Requirement for Certificate of Procurement Integrity -

Modification

FAR 52.203-12 Limitation on Payments to Influence Certain Federal

Transactions

FAR 52.209-6 Protecting the Government’s Interest When

Subcontracting With Contractors Debarred, Suspended

or Proposed for Debarment

DFARS 252.209-7000 Acquisition From Subcontractors Subject to On-site

Inspection Under the Intermediate Range Nuclear Forces

Treaty

Patent/data rights

FAR 52.227-1 Authorization and Consent

FAR 52.227-2 Notice and Assistance Regarding Patent and Copyright

Infringement

DFARS 252.227-7013 Rights in Technical Data and Computer Software

(continued)

Page 14 GAO/NSIAD-96-53 Acquisition Reform
Appendix I 

List of Contractual Clauses Targeted by

Pilot for Review

Clause by category Description

DFARS 252.227-7018 Restrictive Markings on Technical Data

DFARS 252.227-7029 Identification of Technical Data

DFARS 252.227-7037 Validation of Restrictive Markings on Technical Data

Purchasing restrictions

DFARS 252.225-7014 Preference for Domestic Specialty Metals

DFARS 252.225-7023 Restriction on Acquisition of Carbon/Iron Powders

DFARS 252.225-7025 Foreign Source Restrictions

DFARS 252.225-7026 Reporting of Contracting Performance Outside the United

States

DFARS 252.225-7030 Restriction on Acquisition of Carbon, Alloy and Armor

Steel Plate

Socioeconomic

FAR 52.219-8 Utilization of Small Business Concerns and Small

Disadvantaged Business Concerns

FAR 52.219-9 Small Business and Small Disadvantaged Business

Subcontracting Plan

FAR 52.220-3 Utilization of Labor Surplus Area Concerns

FAR 52.220-4 Labor Surplus Area Subcontracting Program

FAR 52.222-1 Notice to the Government of Labor Disputes

FAR 52.222-20 Walsh-Healey Public Contracts Act

FAR 52.222-26 Equal Opportunity

FAR 52.222-35. Affirmative Action for Special Disabled and Vietnam Era

Veterans

FAR 52.222-36 Affirmative Action for Handicapped Workers

FAR 52.222-37 Employment Reports on Special Disabled Veterans and

Veterans of the Vietnam Era

FAR 52.223-2 Clean Air and Water

FAR 52.225.11 Restrictions on Certain Foreign Purchases

DFARS 252.203-7001 Special Prohibition on Employment

Warranty

FAR 52.246-23 Limitation of Liability

Miscellaneous

FAR 52.212-8 Defense Priority and Allocation Requirements

FAR 52.212-13 Stop-Work Order

FAR 52.252-2 Clauses Incorporated by Reference

DFARS 252.204-7000 Disclosure of Information

DFARS 252.249-7001 Notification of Substantial Impact on Employment

DFARS 252.249-7002 Notification of Proposed Program Termination Reduction

Page 15 GAO/NSIAD-96-53 Acquisition Reform
Appendix II 

Comments From the Department of Defense

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 16 GAO/NSIAD-96-53 Acquisition Reform
Appendix II 

Comments From the Department of Defense

Now on p. 10.

Page 17 GAO/NSIAD-96-53 Acquisition Reform
Appendix II 

Comments From the Department of Defense

See comment 1.

Now on p. 6.

See comment 2.

Now on p. 7.

See comment 3.

Page 18 GAO/NSIAD-96-53 Acquisition Reform
Appendix II 

Comments From the Department of Defense

Now on p. 8.

See comment 4.

See comment 5.

See comment 6.

Page 19 GAO/NSIAD-96-53 Acquisition Reform
Appendix II 

Comments From the Department of Defense

The following are GAO’s comments on the Department of Defense’s (DOD)

letter dated April 10, 1996.

GAO Comments 1. Numerous studies document current regulatory and statutory barriers to

military-commercial integration. In fact, DOD is pursuing a variety of

initiatives, such as the single process initiative and reinvention

laboratories, based on the results of those studies. As it gains experience

from its acquisition reform efforts, DOD has learned that there is likely to

be no one solution to overcoming barriers. However, we are not aware of

any other initiatives that address what we believe is unique about the TRW

pilot program, which is the production of a military-unique component in a

commercial facility. We believe that pursuing the objective of identifying

barriers in the TRW pilot at the risk of missing the schedule of producing

and testing the F-22 module would represent a lost opportunity.

2. DOD’s comment does not address any information in the report.

3. According to pilot officials and program documents, the pilot is

identifying all possible barriers that were in place when the contract was

signed, regardless of their current status. This is also true, for example, for

the military quality standard—MIL-Q-9858A—which has been abrogated by

the Secretary of Defense.

4. We agree, and state in the report, that the commercial item definition

does not apply to military-unique components such as those being

produced in the TRW pilot.

5. This comment deals with minor modifications to a commercial item for

military use. It is not relevant to the TRW pilot, which is attempting to

produce a military-unique item in a commercial facility.

6. We agree. DOD’s comment supports our point that other DOD acquisition

reform initiatives do not provide relief for this pilot.

(705119) Page 20 GAO/NSIAD-96-53 Acquisition Reform
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