GETTING

DEFENSE

ACQUISITION

RIGHT

The Honorable Frank Kendall 

Published by the Defense Acquisition University Press 

Fort Belvoir, Virginia 

1 

3 

Table of Contents 

viii Acknowledgments 

Introduction 

Chapter One: Getting Policy Right 

39 Chapter Two: Building Professionalism 

in the Acquisition Workforce 

65 Chapter Three: Managing 

Technical Complexity 

93 Chapter Four: Working With Industry
 

127 Chapter Five: Responding to 

External Forces and Events 

179 Chapter Six: Measuring Progress in Improving 

Acquisition 

203 Conclusion
 

i 
ii 

Getting Defense Acquisition Right

10 

15 

21 

25 

32 

41 

44 

49 

53 

62 

71 

73 

79 

89 

Articles From Defense AT&L Magazine
 

“Better Buying Power Principles—What Are They?,” 

January-February 2016 

“Original Better Buying Power—David Packard Acquisition Rules 

1971,” May-June 2013 

“The Challenges We Face—And How We Will Meet Them,” 

November-December 2012 

“Innovation in the Defense Acquisition Enterprise,” 

November-December 2015 

“Real Acquisition Reform (or Improvement) Must Come From 

Within,” May-June 2016 

“What Does It Mean To Be ‘a Defense Acquisition Professional’?,” 

March-April 2014 

“Ethics and Acquisition Professionalism—It Is All About Trust,” 

September-October 2014 

“Program Manager Assessments—Professionalism Personified,” 

July-August 2015 

“Improving Acquisition From Within—Suggestions From Our 

PEOs,” July-August 2016 

“What Really Matters In Defense Acquisition,” 

January-February 2016 

“The Optimal Program Structure,” July-August 2012 

“Risk and Risk Mitigation—Don’t Be a Spectator,” 

January-February 2015 

“The Trouble With TRLs (With Thanks to Gene Roddenberry and 

David Gerrold),” September-October 2013 

“Manufacturing Innovation and Technological Superiority,” 

September-October 2016 

100 “Our Relationship With Industry,” November-December 2013 

104 “Use of Fixed-Price Incentive Firm (FPIF) Contracts in Development and Production,” March-April, 2013 

109 “DoD Use of Commercial Acquisition Practices—When They 

Apply and When They Do Not,” September-October 2015 
iii 

82 

6 

7 

Table of Contents 

114 “Tying Profit to Performance—A Valuable Tool, But Use With 

Good Judgment,” May-June 2015 

121 “Getting ‘Best Value’ For the Warfighter and the Taxpayer,” 

March-April 2015 

142 “Moving Forward,” January-February 2013 

144 “What Lies Ahead,” July-August 2013 

149 “Protecting the Future,” May-June 2014 

153 “Technological Superiority and Better Buying Power 3.0,” 

November-December 2014 

156 “Our Theme for 2016—Sustaining Momentum,” March-April 

2016 

174 “When and When Not to Accelerate Acquisitions,” 

November-December 2016 

189 “Better Buying Power—A Progress Assessment,” July-August 2014 

207 “Adventures in Defense Acquisition,” January-February 2017 

Article from The ITEA Journal
 

“Perspectives on Developmental Test and Evaluation,” March 2013 

Figures and Tables
 

6 Figure 1. Better Buying Power 1.0 

Figure 2. Better Buying Power 2.0 

Figure 3. Better Buying Power 3.0 

179 Figure 4. Contract Cost Growth on Highest Risk (Major) 

Programs 

181 Figure 5. Profits of the Six Largest DoD Primes 

182 Figure 6. Percent of Major Programs With Cost Reductions 

183 Figure 7. Major Programs Crossing Critical Congressional 

Cost-Growth Thresholds 
iv 

Getting Defense Acquisition Right

67 

96 

97 

184 Table 1. Root Causes for Major Programs Crossing Critical Congressional Cost-Growth Thresholds or Other Major Problems 

185 Figure 8. Planned Length of Active Development Contracts for 

Major Programs 

186 Figure 9. Planned Major Information System Development Time 

186 Figure 10. Contract Schedule Growth on Highest Risk (Major) 

Program 

187 Figure 11. Cost Growth on Highest Risk (Major) Programs Started 

in Different Budget Climates 

E-mails, Correspondence and Statements
 

4 Under Secretary Frank Kendall’s Memorandum for the Acquisition Workforce, Jan. 7, 2015 

Kendall E-Mail about 2016 Program Executive Officer Assessment 

Kendall Statement on Consolidation in the Defense Industry, September 30, 2015 

Joint Statement of the Department of Justice and the Federal Trade 

Commission on Preserving Competition in the Defense Industry, 

autumn of 2015 

128 Kendall letter to Senator John McCain, June 13, 2014 

133 Kendall Memorandum on “Department of Defense Management 

of Unobligated Funds; Obligated Rate Tenets,” September 10, 2012 

136	 Kendall E-Mail to Acquisition, Technology, and Logistics personnel titled “Guidance During FY13 Sequestration and Furloughs,” 

July 9, 2013 

163 Kendall Letter to Service Secretaries and Chiefs on Defense Acquisition 

200 Foreword from the Fourth Annual Report on the Performance of 

the Defense Acquisition System, October 24, 2016 
v 

Dedicated to all the professionals, in the military, government, 


and industry, who create and sustain the products our military depends 


upon to keep us free and secure,
 

And to Beth, Scott, Eric, and James, for the sacrifices they have made so 


that I could make my very limited contributions to that effort.
 
vi

Getting Defense Acquisition Right

 FRANK KENDALL
 

Under Secretary of Defense 


for Acquisition,
 

Technology, and Logistics
 

Frank Kendall was confirmed by 

the U.S. Senate in May 2012 as the 

Under Secretary of Defense for Acquisition, Technology, and Logistics. In that position, he has been 

responsible to the Secretary of Defense for all matters pertaining to 

acquisition; research and engineering; developmental testing; contract 

administration; logistics and materiel readiness; installations and environment; operational energy; chemical, biological, and nuclear weapons; the acquisition workforce; and the defense industrial base. He is the leader of the Department of Defense (DoD) 

efforts to increase the DoD’s buying power and improve the performance 

of the defense acquisition enterprise. Prior to this appointment, he served 

from March 2010–May 2012 as the Principal Deputy Under Secretary and 

also as the Acting Under Secretary. 

Mr. Kendall has more than 45 years of experience in engineering, management, defense acquisition, and national security affairs in private industry, 

government, and the military. He has been a consultant to defense industry firms, nonprofit research organizations, and the DoD in the areas of 

strategic planning, engineering management, and technology assessment. 

Mr. Kendall formerly was Vice President of Engineering for Raytheon 

Company, where he was responsible for directing the management of the 

company’s engineering functions and internal research and development. 

Before joining the administration, Mr. Kendall was a managing partner 

at Renaissance Strategic Advisors, a Virginia-based aerospace and defense 

sector consulting firm. In addition, Mr. Kendall is an attorney and has been 

active in the field of human rights, working primarily on a pro bono basis. 

Within government, Mr. Kendall held the position of Director of Tactical Warfare Programs in the Office of the Secretary of Defense and the 

position of Assistant Deputy Under Secretary of Defense for Strategic Defense Systems. Mr. Kendall is a former member of the Army Science Board 

and the Defense Intelligence Agency’s Science and Technology Advisory 

Board and he has been a consultant to the Defense Science Board and a 
Frank Kendall Biography 

Senior Advisor to the Center for Strategic and International Studies. Mr. 

Kendall also spent 10 years on active duty with the Army serving in Germany, teaching Engineering at West Point and holding research and development positions. 

Over the course of his public-service career, Mr. Kendall was awarded 

the following federal civilian awards: The Defense Distinguished Public 

Service Award, Defense Distinguished Civilian Service Medal, the Secretary of Defense Meritorious Civilian Service Medal, the Presidential Rank 

Award of Distinguished Executive (Senior Executive Service), the Presidential Rank Award of Meritorious Executive (Senior Executive Service), 

and the Army Commander’s Award for Civilian Service. He also holds the 

following military awards from the U.S. Army: the Meritorious Service 

Medal with oak leaf cluster, Army Commendation Medal, and National 

Defense Service Medal. 

Mr. Kendall is a Distinguished Graduate of the U.S. Military Academy at 

West Point, as well as an Army War College graduate, and holds a master’s degree in Aerospace Engineering from the California Institute of 

Technology, a master’s degree in business administration degree from the 

C.W. Post Center of Long Island University, and a juris doctorate from the 

Georgetown University Law Center. 

vii 
Acknowledgments
 

I would like to acknowledge the many operational, government acquisition, and industry professionals who contributed to the content of this volume through more than 45 years of experience, collaborative discussion 

and idea sharing. I am particularly indebted to the support of the Service 

Acquisition Executives and the entire AT&L staff, particularly my Deputy, 

the Honorable Alan Estevez, who all played an important role in the creation of the articles included in this volume. Many thanks go out to the Acquisition Policy Analysis Center Team led by Dr. Phil Anton who brought 

data and analysis to the world of acquisition policy. Thanks also to CAPT 

Dan Mackin, my Military Assistant, who served as my advisor and editorin-chief, assisted by President Jim Woolsey and the fine team at the Defense 

Acquisition University. 

viii 
1 

Introduction
 

“There are two ways of spreading light: 


to be the candle or the mirror that reflects it.” 


—Edith Wharton
 

For most of my adult life, a span of over 45 years, I have worked on some 

aspect of the operation, development, production, and support of American weapon systems. The so-called “defense acquisition system” has produced a long series of diverse advanced technology-based products that 

are widely recognized as the best in the world. At the same time, however, 

this acquisition system has come under constant criticism and numerous 

attempts at “acquisition reform.” 

Some of the criticism is well founded, and some of the acquisition reform 

efforts have produced positive results. Others have had the opposite effect. 

In my role as Under Secretary of Defense for Acquisition, Technology, and 

Logistics (USD[AT&L]) for several years, I have worked hard to pass on to 

the rest of the acquisition workforce of the Defense Department (DoD), and 

to all the stakeholders in defense acquisition, some of the hard-won lessons 

of my decades of experience in the development of new defense products. 

This volume assembles some of the results of that effort, organized by logical topics and preceded by a summary of the specific items discussed. 

During my tenure as Under Secretary, I have written and published a short 

article dealing with some aspect of defense acquisition management roughly 

every 2 months. These articles were published in the DoD’s Defense AT&L 

magazine and also sent to the acquisition workforce by e-mail. Roughly 5 

years in, it occurred to me that this body of work could be integrated into a 

short volume in a way that might be useful to both acquisition professionals and also to anyone looking for a deeper understanding of the subject. In 

looking back over the last several years, it also occurred to me that there were 

a handful of other items that were produced during the course of my tenure 

that should be included to provide a more complete picture. 

This volume begins with acquisition policy and then discusses the most 

important ingredient for successful programs: people—more specifically, 

the acquisition professionals who work in government and industry. 
2 

Getting Defense Acquisition Right

Following these sections, some specific aspects of managing technical complexity in large programs are addressed. Because almost all of our weapons 

systems are designed and produced by private industry under government 

contracts, the next section deals with the relationship between government 

and industry, and how that should be managed for mutual benefit—while 

supporting our warfighters and protecting the American taxpayers’ investments in defense systems. Next, the subject of outside influences on defense 

acquisition is covered, including the impact of budget pressures, legislative 

initiatives, and customer desires. The “customer” for Defense Acquisition is 

the military operator, and this relationship is addressed in detail. The penultimate chapter deals with measuring progress. It addresses the questions 

of how we know if things are getting better or worse. Acquisition policy has 

been changed many times, often out of frustration when results were not 

what was desired. But have those changes had any impact? Finally, I try to 

draw some general conclusions from the preceding chapters. Readers are encouraged to enter or leave this volume at any point based on their interests— 

the whole volume, each chapter, and each article in a chapter, can be read in 

its entirety or individually. 
3 

Chapter One 

Getting Acquisition


Policy Right 


“Experience is never limited and it is never complete; 


it is an immense sensibility, a kind of huge spider-web of the finest 


silken threads, suspended in the chamber of consciousness and catching 


every air-borne particle in its tissue.”
 

—Henry James
 

Here is all the acquisition policy we ought to need: 

• Set reasonable requirements.

• Put professionals in charge.

• Give them the resources they need.

• Provide strong incentives for success.

Unfortunately, there is a whole universe of complexity in each of those 

four items. Because of that complexity, because of our imperfect results 

in delivering new capabilities, and because of the interests of a wide array 

of stakeholders, formal acquisition policy in the United States is expansive and embedded in multiple publications. The basic acquisition policy 

document for the Department is a DoD Instruction, DoDI 5000.02, titled 

“The Defense Acquisition System.” It has been rewritten numerous times 

during my career, but the underlying substance has never really changed 

much. New product development is new product development. The major 

decisions are generic—starting risk reduction, starting design for production, and starting production itself. When I came back into government in 

2010 as the Principal Deputy to then Under Secretary Ashton Carter, I was 

resolved to not rewrite 5000.02 again ... but then I did. I personally wrote 

the basic document and heavily edited the dozen or so enclosures that comprise half of the content. 

I was motivated partly by the fact that a number of legislative changes had 

to be implemented in 5000.02 but most of all I wanted to use the document 

to communicate some overarching principles. The most important of these 

principles was the necessity to thoughtfully tailor program plans to address 
4 

Getting Defense Acquisition Right

the unique circumstances and nature of the product being created. Form 

follows function, not the reverse. Another motivator was the implementation of the Better Buying Power acquisition improvement initiatives my 

predecessor and I had put in place in 2010 and that I modified significantly 

in 2012 as Better Buying Power 2.0 (and again in 2014 as 3.0) As I discuss 

in more detail below, I was also concerned about the morass of statutorily 

required regulations our managers were tasked to comply with. My intent 

was reflected in the cover letter that I put out with the new DoDI 5000.02— 

which is reproduced here: 
5 

Chapter One: Getting Acquisition Policy Right

In addition to DoDI 5000.02, there are many regulatory provisions that 

govern federal and defense contracting. These are embedded in the thousands of pages of the Defense Federal Acquisition Regulation (DFAR) governing defense contracting. These rules have to be administered by our 

contracting professionals and managers. As new legislation is passed or 

new Executive Orders are issued, the DFAR is constantly updated to reflect 

that new guidance. The trend is almost entirely in the direction of adding 

volume to the regulation, not reducing it. In response to legislative direction, I recently chartered a 2-year effort to review the DFAR with the hope 

that it can be dramatically streamlined. This is a very worthwhile endeavor, 

but I hold only limited hope for its success—every provision in the DFAR is 

rooted in some stakeholders’ belief that it will accomplish a desired result, 

often a result only indirectly associated with defense acquisition itself. 

During the last several years, the DoD has used an evolving set of acquisition policy initiatives that then Under Secretary Carter and I started in 

2010. As noted above, they were called the “Better Buying Power” initiatives and were mentioned in the DoDI 5000.02 cover letter. Over the last 

few years, I have used a management philosophy of continuous improvement to modify these initiatives; some have been dropped, and some have 

been added. As we have learned from our experience and made progress, 

we have kept the most significant initiatives but shifted our efforts to emphasize other areas needing improvement. As of 2016, there had been three 

versions or releases of Better Buying Power initiatives. The latest version, 

Better Buying Power 3.0, continues the highest payoff initiatives from earlier versions, addressing cost consciousness, incentives, and building professionalism in particular, and adds an emphasis on increasing technical excellence and innovation. All three iterations are summarized in Figures 1, 

2, and 3 so that you can track both the continuity and the change in policy. 
6 

Getting Defense Acquisition Right

Figure 1. Better Buying Power 1.0 

Figure 2. Better Buying Power 2.0 
7 

Chapter One: Getting Acquisition Policy Right

Figure 3. Better Buying Power 3.0 

The underlying premise, and one I continue to strongly advocate, has always been that acquisition improvement would be incremental, that there 

was no “acquisition magic” that could be applied to all situations and that 

could dramatically improve results. The Better Buying Power initiatives 

sweat the details; that’s where progress has to be achieved. As a result, there 

is a large number of initiatives, and more detailed implementation actions 

behind each initiative. All of the Better Buying Power releases, however, 

have been based on some underlying principles that I decided were worth 

articulating. The first piece in this chapter describes those acquisition management and policy principles. The list of principles is presented in this 

article in its original sequence. I was correctly chastised after I published 

the article for not putting people and professionalism first on this list, and I 

subsequently made this important modification to the sequence. 

The process of creating cutting-edge weapon systems isn’t new. The pace 

of change in technology advances accelerated dramatically in the 19th 

and, particularly, the 20th centuries. This trend continues today in the 

21st century. However, the American reliance on technological superiority for military advantage really didn’t take shape until World War II and 

afterward. With this reliance came the problems associated with accepting 

technological risk in new products, problems that we still confront—cost 

increases, schedule slips, and sometimes failure to deliver an acceptable or 
8 

Getting Defense Acquisition Right

affordable product. In 1971, the year I graduated from West Point, David 

Packard was Deputy Secretary of Defense. This is the David Packard who 

helped found Hewlett-Packard, and who led the “Packard Commission,” 

which influenced the acquisition reform legislation that accompanied the 

Goldwater-Nichols reforms of 1986. Deputy Secretary Packard published a 

set of “Acquisition Rules.” I had this list put on posters and hung in the Pentagon meeting room where the Defense Acquisition Board (the committee 

that advises the Under Secretary on major acquisition decisions) meets. I 

consider this list to be the original Better Buying Power. It is discussed in 

the second piece in this chapter. 

The next article in this chapter is a more detailed discussion of some of what 

I have referred to as “core” elements of all the Better Buying Power initiatives. 

Written shortly after the second version—Better Buying Power 2.0—this article goes into more detail about these core concepts. They include affordability constraints on requirements and designs, the use of “should cost” to actively target costs for reduction, and the importance of defining “best value” 

so that industry is motivated to offer optimized product designs in line with 

warfighter priorities. These concepts should be core elements of acquisition 

policy and embedded deeply in the Department’s culture. Instilling these 

values and concepts in the workforce and into the DoD culture was a priority 

throughout my tenure as USD(AT&L) and a major reason that I stayed much 

longer then my predecessors. 

The overarching goal of defense acquisition is to give our warfighters a significant military advantage over any opponent they might face. One key to 

meeting that goal is the ability to create innovative, even game-changing 

products that enable innovative operational concepts. The need for continuing technological superiority was the motivator for the third version 

of Better Buying Power. Starting with Secretary Hagel’s Defense Innovation Initiative, later endorsed by Secretary Ashton Carter, for the last few 

years we have been emphasizing the importance of innovation across the 

Department. Secretary Carter’s innovation initiatives included the Defense 

Innovation Unit Experimental or DIU-X, the Strategic Capabilities Office, 

and the Force of the Future personnel initiatives. Deputy Secretary Robert 

Work introduced the concept of a Third Offset Strategy. All three of us 

have been working toward the common goal of encouraging, seeking, and 

integrating more innovation into our processes. In the next article in this 

chapter, I took up the subject of innovation and discussed the ingredients 

needed in an organization for innovation to occur. They include technical 

expertise, freedom, risk tolerance, persistence, and teamwork or collaboration. I closed with a discussion of the need for capital (funding). While the 

development of good ideas is essential to innovation, so too is the need for 

money to convert those ideas into reality. In my view, all the focus on in­
9 

Chapter One: Getting Acquisition Policy Right

novation by the Department over the last few years may have obscured the 

fact that our fundamental problem has not been lack of ideas, but the lack 

of resources to make them into products. 

The final piece in this chapter is the most recent. It was written in part in 

reaction to the latest round of acquisition reform coming from the Congress. This article discusses the basic structure in which acquisition policy 

must operate, points out some of the inherent limitations in legislative attempts to improve acquisition, and charges our acquisition professionals 

with the goal that ultimately only they can achieve—lasting and significant 

improvement in our acquisition performance. The next section will take 

up the topic of those acquisition professionals who are central to executing 

any improvement effort. 
10 

Getting Defense Acquisition Right

Better Buying Power Principles—


What Are They? 


Reprinted from Defense AT&L: January-February 2016 

Inevitably, whenever any senior leader embarks on a set of initiatives intended to improve an organization’s performance and labels that set of initiatives, he or she can expect one reaction for certain. That reaction is what 

I would describe as genuflecting in the direction of the title of the initiative 

by various stakeholders who are trying to show the leader that they are 

aligned with his or her intent. 

Sometimes—usually, I hope—this is sincere and backed up by real actions 

that reflect the intention of the initiative. Sometimes it is just, for lack of a 

better word, gratuitous. Better Buying Power (BBP) is no exception. One 

form this takes is assertions, which I see often enough to be writing this 

piece, that the recommended course of action is consistent with “BBP principles.” (Presumably, the idea is that this will lead to instant support, but 

that is not a reliable assumption.) 

I find this amusing, because so far as I know we’ve never articulated any 

BBP principles. When I do see this in a briefing, I ask the presenter what 

those principles are. So far, no one has been able to articulate them very 

well. 

Under the circumstances, it seems like a good idea for me to provide some 

help answering this question. So here are some BBP principles. I also want 

to thank the 24 acquisition experts in the Defense Acquisition University’s 

fall 2015 Executive Program Manager’s Course who provided a number of 

suggestions for this list and article. 

The Principles Suggested by Acquisition Experts: 

•	 Principle 1: Continuous improvement will be more effective than radical 

change.

•	 Principle 2: Data should drive policy.

•	 Principle 3: Critical thinking is necessary for success; fixed rules are too

constraining.

•	 Principle 4: Controlling life-cycle cost is one of our jobs; staying on budget isn’t enough.

•	 Principle 5: People matter most; we can never be too professional or too

competent.

•	 Principle 6: Incentives work—we get what we reward.
11 

Chapter One: Getting Acquisition Policy Right

•	 Principle 7: Competition and the threat of competition are the most effective incentives. 

•	 Principle 8: Defense acquisition is a team sport. 

•	 Principle 9: Our technological superiority is at risk and we must respond. 

•	 Principle 10: We should have the courage to challenge bad policy. 

Principle 1 

Continuous improvement will be more effective than radical change. All of 

BBP is based on this concept. It’s the reason there have been three editions 

of BBP. We make incremental change focused on the biggest problems we 

see. Then we monitor the results and evaluate progress. We drop or modify 

ideas that aren’t working, and we attack the next set of problems in order 

of importance, priority or expected impact. Those ideas and policies that 

work are not abandoned for the next shiny object we see. I have seen any 

number of acquisition reform fads that had little discernible impact on the 

acquisition performance of the Department of Defense (DoD). Some had 

adverse impacts. During my career, we have had the following: Blanket 

Firm Fixed Price Development Contracting, Total Quality Management, 

Reinventing Government, and Total System Performance—to name just 

a few. 

I generally am not a fan of broad management theories and slogan-based 

programs. Sometimes they contain sound ideas and policies—but they seldom outlast the leaders who sponsor them, and the hype associated with 

them usually exceeds their value. The complexity of acquiring defense 

products and services makes simple solutions untenable; we have to work 

hard on many fronts to consistently improve our results. 

Principle 2 

Data should drive policy. Outside my door a sign is posted that reads, “In 

God We Trust; All Others Must Bring Data.” The quote is attributed to 

W. Edwards Deming, the American management genius who built Japan’s 

manufacturing industry after World War II. The three annual reports on 

The Performance of the Defense Acquisition System that we have published 

are based on this premise. It is difficult to manage something you cannot 

measure. Despite the noise in the data, it is possible to pull out the correlations that matter most and to discover those that have no discernible 

impact. As we have progressed through the various editions of BBP guided 

by the results of this analysis, we have adjusted policy, such as preferred 

contract type and incentive structure. 

Principle 3 

Critical thinking is necessary for success; fixed rules are too constraining. 

This principle was the core concept behind BBP 2.0, which was subtitled 
12 

Getting Defense Acquisition Right

“a guide to help you think.” Our world is complex. One-size-fits-all cookbook solutions simply don’t work in many cases. The one question I most 

often ask program managers (PMs) and other leaders is “Why?” When we 

formulate acquisition strategies, plan logistics support programs, schedule 

a series of tests, decide which technology project to fund or do any other 

of the myriad tasks that acquisition, technology and logistics professionals 

are asked to do every day, we have to apply our skills experience and understanding of cost, benefits, and relative priorities to arrive at the best answer. 

There is no shortage of policy or history to assist us, but at the end of the 

day we have to figure out the best course of action in a specific circumstance, balancing all the complex factors that apply to a given situation. 

Principle 4 

Controlling life-cycle cost is one of our jobs; staying on budget isn’t enough. 

This idea, that managing cost is a core responsibility, is at odds with a long 

history of focusing on execution (spending) in order to maintain budgets. 

The idea introduced in BBP 1.0 of “should cost” was intended to compel 

our managers (all of our managers) to pay attention to their cost structure, 

identify opportunities for savings, set targets for themselves and do their 

utmost to achieve those targets. I am hopeful that this idea is becoming institutionalized and, what is more important, is becoming part of a culture 

that values proactive efforts to control cost. Once in a while, I still see token 

savings targets. But, for the most part, our managers are implementing this 

concept and doing so effectively. One cautionary note is that this does not 

imply we should make poor decisions that result in short-term savings at 

the expense of high long-term costs. 

Over the last 5 years, we have billions of dollars in savings that we can point 

to. In all cases, those dollars have gone to higher-priority Service, portfolio 

or program/activity needs. The result is more capability for the warfighter 

at less cost to the taxpayer. 

Principle 5 

People matter most; we can never be too professional or too competent. 

We introduced an entire section on building professionalism in BBP 2.0. It 

was a major oversight that former Under Secretary of Defense for Acquisition, Technology, and Logistics Ashton Carter and I left this out of BBP 1.0. 

Improving over time the expertise, values and competencies of our professionals is the best way to improve defense acquisition, technology and 

logistics outcomes. This was never intended to imply that the workforce is 

not already professional—of course it is. But more is better, and every one 

of us can be better at what we do—including me. The best statutes, processes and policies in the world will not by themselves make us or anyone 

in industry better managers, engineers, business people or logisticians. We 
13 

Chapter One: Getting Acquisition Policy Right

should all constantly increase the DoD’s professionalism, for ourselves and 

the people who work for us. 

Principle 6 

Incentives work and we get what we reward. Policies related to incentives 

are found everywhere in the various editions of BBP, most obviously those 

associated with contract types and incentive structures. Others include 

the use of open systems, how we manage intellectual property, the monetization of performance in source selection, and the use of prototypes to 

encourage innovation. In BBP 1.0 and BBP 2.0, we focused on getting the 

business incentives right. In BBP 3.0, we focused on incentives to innovation and technical excellence. 

Principle 7 

Competition and the threat of competition provide the most effective incentive. All businesses exist in large part for the purpose of making a profit 

for their investors. The opportunity to gain business through competition 

and the threat that an existing market position will be lost as a result of 

competition are powerful motivators. One thing I enjoyed about my time 

working in the defense industry was the simplicity of the metric and the 

fact that everyone in the firms I worked with understood that metric: If 

something increased profit, it was good; if it didn’t do so, it wasn’t good. 

When we rolled out the first set of BBP initiatives, industry was concerned 

that we were waging a “war on profit.” That was never our intention. What 

we wanted and still want to do is align profit with the desired performance 

for the warfighter and the taxpayer. Many BPP initiatives are designed to 

foster competition or the threat of competition. 

Principle 8 

Defense acquisition is a team sport. Over the three editions of BBP, we have 

pointed to the importance of close cooperation and coordination between 

participants and stakeholders. The importance of the requirements and intelligence communities were highlighted in BBP 2.0 and 3.0, respectively. 

The nonacquisition leaders who are responsible for much of the DoD’s service contracts are another important community. Defense acquisition can 

only be successful and efficient if all participants recognize and respect 

other participants’ roles and responsibilities. 

Principle 9 

Our technological superiority is at risk, and we must respond. This fact is 

the reason for BBP 3.0. The combination of cutting-edge, strategic and increasing investments made by potential adversaries, coupled with our own 

budgetary stress and global commitments, are causes for alarm. We need 
14 

Getting Defense Acquisition Right

to do everything we can to maximize the return on all our investments in 

new capability, wherever those investments are made. BBP 3.0 focuses on 

all the ways in which we expend research and development (R&D) funding 

(DoD laboratories, industry independent R&D, contracted R&D, etc.) and 

on the opportunities to spend those funds more productively. The LongRange Research and Development Planning Program recommendations 

are intended to provide guidance on how to achieve this. BBP 3.0 also includes the increased use of experimental prototypes and other measures 

designed to spur innovation—such as early concept definition by industry and monetary incentives to industry to develop and offer higher-thanthreshold performance levels. We need to reduce cycle time, eliminate unproductive bureaucracy, and increase our agility by accepting more risk 

when it is warranted. All of these measures are BBP initiatives. 

Principle 10 

We should have the courage to challenge bad policy. One of Deming’s principles was that successful organizations “drive out fear.” He meant that a 

healthy organizational culture encourages members to speak out and contribute ideas and inform management about things that are not as they 

should be. We should not be afraid to speak up when we see bad policy, or 

policy applied too rigidly where that clearly isn’t the best course of action. 

We should not be afraid to offer creative ideas or to challenge conventional 

wisdom, and we should encourage others to do so as well. None of the BBP 

initiatives, or their more detailed implementation guidance, are intended 

to apply in every possible situation. All of us should be willing to “speak 

truth to power” about situations in which policies simply are not working 

or will not achieve the intended result. The annual PM Program Assessments that I started last year and included in BBP 3.0 proved to me that the 

chain of command has a lot to learn from the very professional people on 

the front lines of defense acquisition. This applies to all the professionals 

who support or work for those PMs also. Continuous improvement comes 

from the willingness to challenge the status quo. 
15 

Chapter One: Getting Acquisition Policy Right

The Original Better Buying Power— 

David Packard Acquisition Rules 

1971 

Reprinted from Defense AT&L: May-June 2013 

In this article, I thought I would give us all a break from our budget woes, 

sequestration, and continuing resolutions—issues I hope will be resolved 

before this goes to print. 

In 1971, I graduated from West Point. This was also the same year that 

David Packard, the Packard in Hewlett Packard, who was then the Deputy 

Secretary of Defense (there was no Under Secretary for Acquisition), published his rules for Defense Acquisition. I wouldn’t say there has been nothing new under the sun since then, but some things do endure. 

Recall that by 1971 we had already been to the moon, and the digital age, 

enabled by solid state electronics, had just begun. By the fall of 1971, I 

was at Caltech where I designed logic circuits using solid state integrated 

components that included a few specific logic functions—several orders of 

magnitude from current technology, and I was reducing experimental data 

using the first engineering math function digital calculator. My slide rule 

had become obsolete. Deputy Secretary Packard’s rules, however, still resonate. I recently had them put on a poster and hung it in the Pentagon in the 

room we use for Defense Acquisition Board (DAB) meetings. Here they are 

with a little commentary from both David Packard and me. You should 

recognize a number of areas of overlap with Better Buying Power. 

1. Help the Services Do a Better Job. Improvement in the development 

and acquisition of new weapons systems will be achieved to the extent the 

Services are willing and able to improve their management practices. The 

Services have the primary responsibility to get the job done. OSD offices 

should see that appropriate policies are established and evaluate the performance of the Services in implementing these policies. 

I continue to struggle with achieving the appropriate degree of staff “oversight,” but I certainly agree with this sentiment. Services manage programs. 

As Defense Acquisition Executive (DAE), I set policy and I make specific 

decisions about major investment commitments for large programs, usually at Milestone Reviews. The staff supports me in those decisions, and I 

expect solid independent “due diligence” assessments for those decisions 
16 

Getting Defense Acquisition Right

from the staff of the Office of the Secretary of Defense (OSD). All other staff 

activities should be about helping the Services be more effective, ensuring 

that our policies are well defined, and getting feedback on what works and 

what needs to be improved in our acquisition practices. 

2. Have Good Program Managers with Authority and Responsibility. If

the Services are to do a better job, they must assign better program managers to these projects. These managers must be given an appropriate staff 

and the responsibility and the authority to do the job, and they must be 

kept in the job long enough to get something done. 

I don’t know anything more basic and important to our success than this 

imperative. Having seen more than 4 decades of defense acquisition policy 

changes, I am absolutely convinced that nothing matters as much as competent, professional leadership. Once you have that, the rest is details. It 

was my concern for the professionalism of the acquisition workforce that 

led to the inclusion of an additional category of initiatives focused on our 

workforce in BBP 2.0. We have a lot of good, even great, extremely dedicated, professionals working in Defense Acquisition. But we need a deeper 

bench, and every one of us can improve on our own abilities. In the tough 

budget climate of today, managers at all levels, including Military Department and Agency leadership, should pay a great deal of attention to retaining and managing our talent pool. At the tactical level, I’m looking 

for some opportunities to take a “skunk works”-like approach to a pilot 

program in each Service. The key to implementing this approach, however, 

and what I want to be sure of before I authorize it, will be a highly qualified 

and appropriately staffed government team that will be with the project 

until the product is delivered. 

3. Control Cost by Trade-offs. The most effective way to control the cost of 

a development program is to make practical trade-offs between operating 

requirements and engineering design. 

The affordability as a requirement element of Better Buying Power is intended to provide a forcing function for just this purpose. I’ve seen several 

variations of this; during my first tour of duty in OSD, we used “Cost as an 

Independent Variable” to try to capture this idea. The approach we are using now relies on the affordability caps (which are based on future budget 

expectations—not on cost estimates) that we are establishing early in the 

design process or product life cycle (Milestones A and B). The requirement 

to deliver products that meet the affordability caps is intended to force requirements prioritization and trade-offs among competing needs. I plan to 

insert a Requirements Decision Point prior to Milestone (MS) B to help facilitate this. I will continue to put these affordability caps in place and will 
17 

Chapter One: Getting Acquisition Policy Right

be enforcing them over the next several years. For non-ACAT I programs, 

the Services and Agencies should be doing the same. 

4. Make the First Decision Right. The initial decision to go ahead with

full-scale development of a particular program is the most important decision of the program. If this decision is wrong, the program is doomed 

to failure. To make this decision correctly generally will require that the 

program be kept in advanced development long enough to resolve the key 

technical uncertainties, and to see that they are matched with key operating requirements before the decision to go ahead is made. 

I have long regarded the decision to enter Engineering and Manufacturing Development (EMD) as the single most important decision in a program’s life cycle. The name has changed several times over my career, 

and Deputy Secretary Packard refers to it as full-scale development—but 

we are talking about the commitment to go on contract for design of a 

producible product that meets stated requirements, engineering development test articles, and for the tests that will be necessary to confirm 

performance prior to starting production. 

At this point, we are committing to on average about 10 percent to 20 

percent of the product’s life-cycle cost to years of development work, and 

to getting a product that we will field ready for production. Among the 

most disturbing sources of waste in our system are the programs we put 

into EMD, spend billions on, and then cancel—sometimes before EMD is 

complete and sometimes after some initial production. Part of getting this 

decision right (in addition to affordability) is having the risk associated 

with the product and its requirements under control and sufficiently understood and reduced so EMD can be executed efficiently and successfully. 

In recent years, we have focused on the Technology Readiness Level (TRL) 

as a metric for maturity. I find this metric to be useful, but not adequate 

to the task of assuring readiness to enter EMD, and not a substitute for a 

thorough understanding of the actual risk in the program—necessary but 

not sufficient, in other words. In addition to technology risk, we have to 

manage engineering and integration risks. More importantly, we have to 

deeply understand the actual risk, what it implies, and what the tools are 

to mitigate it before and during EMD. I commissioned a review of programs transitioning from Technology Development into EMD over a year 

ago and discovered we are not paying adequate attention to the actual risk 

associated with the actual product we intend to acquire. In many cases, 

industry was not being incentivized to reduce the actual risk in a product it 

would produce; it was being incentivized to claim a TRL and to do a demonstration. This isn’t necessarily the same thing as reducing the risk in an 

actual product. The label of a TRL isn’t enough to ensure that the risks of a 
18 

Getting Defense Acquisition Right

product development are under control; we have to look deeper. This decision is too important to get wrong. 

5. Fly Before You Buy. Engineering development must be completed before 

substantial commitment to production is made. 

If you have read any article about the F-35 Joint Strike Fighter in the last 

year, you probably saw a quote of my comment about “acquisition malpractice.” I was talking specifically about the decision to enter production 

well before the first flight of a production representative EMD prototype. 

The earlier Milestones in our Materiel Development Decisions (MDD) system for weapons acquisition—MS A and MS B—generally are based on 

planning documents and analysis. MS B also is based on risk-reduction 

activities, but if these have been completed, the balance of the review is 

about intended business approaches, engineering, test planning, and funding adequacy. The decision to enter production at MS C is different. Here 

the emphasis is on whether the design meets requirements and is stable. I 

would regard this decision as a close second to the EMD decision in importance. Once we start production, we are effectively committed, and it will 

be very difficult to stop. I seriously considered stopping F-35 production a 

year ago, but I believe I made the right decision to continue. We shouldn’t 

put ourselves in the position of having to make that sort of a choice. 

Before the commitment to production, the ability to meet requirements and 

the stability of the design should be demonstrated by developmental testing of EMD prototypes that are close to the production design. Some degree 

of concurrency usually is acceptable; all testing doesn’t usually have to be 

complete before the start of low-rate production. The degree of concurrency 

will vary with the urgency of the need for the product and the specific risks 

remaining. But as a general practice, we should “fly before we buy.” 

6. Put More Emphasis on Hardware, Less on Paper Studies. Logistics

support, training, and maintenance problems must be considered early in the development, but premature implementation of these matters 

tends to be wasteful. 

Most of the costs of our products are neither development nor production 

costs. It is support costs that predominate. These costs do need to be considered up front, early in the requirements and design processes and as the 

acquisition strategy is being formulated. They drive considerations of the 

data and property rights we will acquire and the implementation of open 

systems and modular designs (all features of Better Buying Power). While 

we should avoid setting up support functions too much in advance of need, 

we also should ensure that the ability to meet support requirements is designed in and tested at the appropriate places in the development program, 
19 

Chapter One: Getting Acquisition Policy Right

and we must ensure that an adequate budget will be available to sustain the 

product. Better Buying Power’s affordability caps on sustainment costs are 

designed to ensure that these upfront analyses are conducted early in development, preferably while there is still competition for the development 

work, and before the design concept has matured to the point that tradeoffs to improve supportability no longer are possible. 

7. Eliminate Total Package Procurement. It is not possible to determine

the production cost of a complex new weapon before it is developed. The 

total package procurement procedure is unworkable. It should not be used. 

Total Package Procurement is one of those acquisition ideas that come 

along occasionally and are embraced for a time until it becomes apparent 

they are not panaceas. I’m speculating, but I would guess the Deputy Secretary had seen some disasters come out of this approach. The idea is to get 

prices (as options, presumably) for the production run at the time we start 

development. I’m not quite as pessimistic as Deputy Secretary Packard was 

about the ability to predict production costs, but I’m pretty close. We are 

tempted occasionally to ask for production prices as options at the time we 

are doing a competitive down-select for EMD. This is tempting because we 

can take advantage of competitive pressure that we will lose after we enter 

EMD. While I wouldn’t close out this idea entirely as Deputy Secretary 

Packard did in this rule, I think we have to consider this approach carefully 

before adopting it. There are other ways to provide incentives to control 

production costs, and we need to consider the full range of options and the 

pros and cons and the risks associated with them before we decide on an 

acquisition strategy or a contract structure for a specific product. BBP 2.0 

takes this approach. 

8. Use the Type of Contract Appropriate for the Job. Development contracts for new major weapons systems should be cost-incentive type contracts. (a) Cost control of a development program can be achieved by better 

management. (b) A prime objective of every development program must be 

to minimize the life-cycle cost as well as the production cost of the article 

or system being developed. (c) Price competition is virtually meaningless 

in selecting a contractor for a cost-incentive program. Other factors must 

control the selection. 

We seem to work in 20-year cycles. In 1971, David Packard supported the 

use of cost-plus contracts for development. About 20 years later in the late 

1980s, we tried a policy or requiring firm fixed-price contracts for development. I lived that dream from the perspective of having, in the early 

1990s, to extricate the Department from the disasters that ensued—not 

least among them the Navy’s A-12 program cancellation, which still is in 

litigation more than 20 years later. Fast forward another 20 years, and we 
20 

Getting Defense Acquisition Right

are seeing suggestions of using this approach again. Recently, I wrote at 

length about the times when a fixed-price development approach might be 

appropriate, and I won’t repeat that material here. There are times when 

fixed price is the right approach to development contracts, but it is the exception rather than the rule. I completely agree with David Packard that 

costs can be controlled on a cost-plus contract by better management. It requires hands-on management and a willingness to confront industry about 

excessive and unnecessary costs or activities. It also requires strong incentives to reward the performance we should expect, coupled with the will 

and expertise to use those incentives effectively. The importance of controlling life-cycle costs has been discussed earlier. I don’t entirely agree that 

price competition is meaningless in selecting a contractor for a development contract, but I do agree that other factors should usually be of greater 

significance to the government. Most of all, I fully concur with Deputy 

Secretary Packard’s overarching point: Use the contract type appropriate 

for the job. If you get a chance to attend a DAB or DAES meeting, or just to 

come into the Pentagon, you can see David Packard’s rules on the wall in 

Room 3B912. They still resonate. We have tough jobs, and the professionalism needed to do them effectively is a constant. There are no rules that can 

be a substitute for that. 
21 

Chapter One: Getting Acquisition Policy Right

The Challenges We Face—
 

And How We Will Meet Them 


Reprinted from Defense AT&L: November-December 2012 

“Supporting the warfighter, protecting the taxpayer”—these words were 

suggested by my military assistant for a small sign outside the door to my 

office in the Pentagon. They succinctly express the challenges those of us 

who work in defense acquisition, technology, and logistics face in the austere times we have entered. We will have to provide the services and products our warfighters need and protect the taxpayers’ interest by obtaining 

as much value as we possibly can for every dollar entrusted to us. 

This is nothing new; we have always tried to do this. Going forward, however, we will have to accomplish this goal without reliance on large overseas 

contingency funding and in the face of continued pressure on defense budgets brought about not by a change in the national security environment, 

which is increasingly challenging particularly with the emergence of more 

technologically and operationally sophisticated potential opponents, but 

by the policy imperative to reduce the annual budget deficit. 

Hopefully, the specter of more than $50 billion in sequestration cuts next 

year will be avoided, but, even if it is, we can expect the pressure on defense 

budgets to increase. Last winter, the department published new strategic 

guidance as well as a budget designed to implement that strategy. Like all 

budgets, this one did not make any allowance for overruns, schedule slips, 

or increases in costs for services beyond the standard indices assumed by the 

Office of Management and Budget, indices that often are exceeded. We have 

our work cut out for us today and for as far into the future as we can see. 

The overriding imperative of obtaining the greatest value possible for the 

dollars entrusted to us is not just an acquisition problem; it encompasses all 

facets of defense planning, as well as execution of acquisition programs and 

contracted services. We have to begin by understanding and controlling 

everything that drives cost or leads to waste. The budgeting/programming 

and requirements communities are as important to success as our planning 

and management and industry’s execution of acquisition contracts. The 

quest for value includes an understanding of: (1) the constraints we must 

live within; (2) a willingness to prioritize our needs and accept less than we 

might prefer; (3) an understanding of the relative value of the capabilities 

we could acquire; and (4) an activist approach to controlling costs while we 
22 

Getting Defense Acquisition Right

deliver the needed capability. Only the last of these is solely an acquisition 

responsibility. 

For the last 2 years, and as part of the original Better Buying Power initiative, we required that affordability caps be placed on programs entering the 

acquisition process. These caps are not the result of anticipated costs; they 

are the result of an analysis of anticipated budgets. Here is a simple example 

of what I mean: If we have to maintain a fleet of 100,000 trucks that we 

expect to last 20 years, then we will have to buy an average of 5,000 trucks 

per year. If we can only expect to have $1 billion a year to spend on trucks, 

we must buy trucks that cost no more than $200,000 each. That $200,000 is 

our affordability cap. Affordability is not derived from cost; it dictates cost 

constraints that we have to live within. The source of the type of analysis illustrated here is generally not the acquisition community; it comes primarily from force planners and programmers, working in collaboration with 

acquisition people. We have affordability caps on a number of programs 

now, both for production costs and sustainment costs. Our greatest challenge going forward will be to enforce those caps. 

To achieve affordability caps, we will need a willingness to identify and 

trade off less important sources of cost. In other words, we will have to 

prioritize requirements, identify the costs associated with meeting those 

requirements, and drop or defer the capabilities that do not make the affordability cut. This is a simple formula, but one the department has been 

reluctant to act on in the past. Too often, our history has been one of starting programs with desirable but ambitious requirements, spending years 

and billions of dollars in development, and perhaps in low rate production, and then finally realizing that our reach had exceeded our grasp. The 

most recent example of this is the Expeditionary Fighting Vehicle, which 

was canceled after many years in development because it was unaffordable. 

There are many others. 

The acquisition community and the requirements communities must work 

together to understand priorities and make these choices as early as possible. 

Delay in confronting difficult trade-offs will only lead to waste. If a 1 percent 

or 2 percent change in a performance goal will result in a 10 percent or 20 

percent cost reduction, that trade should be considered as early as possible. 

Configuration Steering Boards are one mechanism to address requirements 

trade-offs, but they must meet often, be empowered, and have the data they 

need to make informed decisions. When the affordability of the full requirements for a new product that hasn’t been developed yet is uncertain, industry 

must be given prioritized requirements so that its offerings can be optimized 

to meet the highest-priority user needs within the cost cap. Again, this takes 

close cooperation between communities and the willingness on the part of 
23 

Chapter One: Getting Acquisition Policy Right

the requirements community to articulate priorities and to take into consideration the costs of meeting less essential requirements. 

One situation I have seen on occasion in the last few years, and one I expect we will see more in the future, is the case in which “best value” has 

to be clearly defined. Often in these cases there is a competition between 

companies offering dissimilar capability levels based on existing products 

that may be modified to meet a need. The Air Force tanker program is an 

example of this: Both offerings were based on commercial aircraft and both 

could meet the basic requirements, but they also had differing capabilities 

with disparate military utility as well. In situations like this, the onus is on 

us, primarily on the user, to determine the value to the government of the 

different levels of capability and to apply that understanding objectively in 

the source selection process. Defining the value of a capability to the customer (what the customer is willing to pay for something) has nothing to 

do with the cost of the capability. Read that last sentence again—it is very 

important. In the KC-46 tanker situation, the Air Force determined that 

it was only willing to pay up to 1 percent more for the extra features that 

might be offered. Again, this had nothing to do with what those features 

cost. The bottom line is that, in the austere times we can expect going forward, we will need to understand how much we are willing to pay in total 

(the affordability cap) and how much of a premium we are willing to pay for 

additional capability beyond the threshold requirement. We will also have 

to communicate these parameters clearly to industry. 

If we have constrained our appetites to what we can afford and to what we 

consider best value, now we have to execute more effectively than we have 

in the past. Historically, we have overrun development programs in the 

high 20 percent range, and we have overrun early production lots by almost 

10 percent. This has to stop. It will not stop because of any one thing we 

do or any one set of policies. If controlling acquisition costs were easy, we 

would have done it decades ago. 

Soon I will be publishing the next round of Better Buying Power initiatives (BBP 2.0), perhaps by the time this article goes to press. However, the 

central idea of Better Buying Power is not the list of specific management 

practices or policies we are currently emphasizing. The central idea is that 

we must all continuously look for ways to improve how we do business and 

the outcomes we achieve. We have to understand our costs; we have to look 

for opportunities to reduce them; and we have to attack unnecessary costs 

as the enemy of the department that they are. The whole idea of “should 

cost” management approaches and goals reflects this concept. So too do the 

various policy, management, and contracting initiatives we are pursuing 

under the Better Buying Power rubric and throughout everything we do. 
24 

Getting Defense Acquisition Right

We should not be content with staying within our budgets. It is not our 

job to spend the budget. It is our job to provide our warfighters with the 

greatest value we can for every penny of the money the taxpayers provide 

to us. If we keep this always firmly in mind, we will successfully meet the 

challenges we face. 
25 

Chapter One: Getting Acquisition Policy Right

Innovation in the Defense 


Acquisition Enterprise
 

Reprinted from Defense AT&L: November-December 2015 

Innovation has become a very popular word lately. Former Secretary of 

Defense Chuck Hagel announced the Defense Innovation Initiative about 

a year ago. At about the same time, the draft Better Buying Power 3.0 set 

of initiatives, focusing on technical excellence and innovation, were published for comment. Deputy Defense Secretary Robert O. Work has led the 

effort to develop an innovative “Third Offset Strategy.” Most recently, Secretary of Defense Ashton Carter announced the opening of the Defense 

Innovation Unit—Experimental, or DIU-X, in California’s Silicon Valley. 

President Obama has led the administration’s successful opening of several 

Manufacturing Innovation Institutes, most of which are sponsored by the 

Department of Defense (DoD). And more institutes are on the way. 

Today it is possible to obtain advanced degrees at major universities in the 

fields of innovation and entrepreneurship. Many books and articles have 

been written on innovation, perhaps none more well-known than Clayton Christianson’s “The Innovators Dilemma.” I would like to add a few 

thoughts to that body of work by making some very unscientific (meaning 

unsupported by data) comments on the ingredients needed to foster and 

encourage innovation—and on the extent to which the DoD acquisition 

enterprise has or does not have those ingredients today. 

The first and absolutely necessary ingredient is knowledge. Technical innovation is itself, almost by definition, a new idea. But new ideas are rooted in 

the knowledge that makes the new idea conceivable and practical. Part of 

Better Buying Power 3.0 involves increased support for education in STEM 

(science, technology, engineering, and mathematics). Our educational system provides the foundation of our knowledge, but that is just the beginning. Experience, exposure to a wide and diverse range of technical fields, 

and continuing in-depth study are all important. For the more exciting 

areas of technical innovation today, this knowledge is increasingly highly 

specialized and deep. I recently visited the Massachusetts Institute of Technology and spoke to researchers in the fields of biological process-based 

materials production, novel computational architectures, and autonomy. 

These are areas in which it is not possible to enable innovation unless one 

has a deep knowledge of the science and associated technology. I believe 

that we are in the early stages of some explosive growth in the products that 
26 

Getting Defense Acquisition Right

these and other technologies will make possible, but some very specialized 

advanced technology work will have to be accomplished to achieve that potential. Once that occurs, innovative applications of these technologies will 

be created at an exponential rate. In many cases today, the DoD is not the 

primary financial supporter of the relevant work. Nevertheless, the DoD’s 

basic research program still represents an important contributor, and it 

provides a basis by which the DoD can shape and capitalize on new technical knowledge as it is created. By reaching out to nontraditional sources, 

such as through the DIU-X, the DoD intends to increase its knowledge of 

the possibilities that commercial cutting edge technology can offer to DoD. 

My second ingredient is freedom. By this, I mean the freedom to have a 

new idea and to take action in pursuit of that idea. I mean the freedom to 

fail and start again. I also mean freedom from bureaucratic constraints. 

Our free enterprise system provides this ingredient on a national scale, and 

it is the most powerful economic engine ever created. The United States 

stands out as a place where it is amazingly easy to start a new business. I’ve 

done it a couple of times. 

Within the DoD, one of our most effective and successful institutions—the 

Defense Advanced Research Projects Agency (DARPA)—is a living testament to the value of freedom. I zealously guard DARPA’s freedom from the 

many parts of the DoD that see DARPA’s budget as an opportunity to fund 

something they need. The whole concept of DARPA is that the organization 

has the freedom to choose its own high-risk but high-payoff investments. 

In DoD more broadly, we set strategic goals for technology investment, require a certain fraction of the Services Science and Technology work to be 

in these areas and leave those organizations the freedom to choose their 

own priorities for the balance of their work. Within DoD, we also allow our 

contractors to pursue Independent Research and Development (IR&D) as 

an allowable overhead cost with very little constraint. 

I made industry a little nervous recently by proposing in Better Buying Power 3.0 to increase the DoD’s oversight of this work. The fundamental concern 

of industry partners has been the possible loss of freedom to make their own 

IR&D investment decisions. That was never my intent. I once ran a major 

defense contractor’s IR&D program, and I appreciate industry’s perspective. 

I appreciate the value, to industry and the DoD, of allowing industry to place 

its own bets on technology that might increase a firm’s competitiveness. 

After carefully considering several alternatives, the policy I propose would 

merely require industry to brief an appropriate DoD officer or official prior 

to and after concluding an IR&D project, and to document that the meeting occurred as part of the accounting for the project. This policy would 
27 

Chapter One: Getting Acquisition Policy Right

not require sponsorship or approval of an IR&D project by a DoD official, 

but it would require industry to communicate directly with appropriate 

DoD personnel and to obtain feedback on the proposed work and to communicate the results when the work is complete. This should not constrain 

industry’s freedom in any way that current regulations and statutes don’t 

already require, and it will provide the benefit of ensuring more frequent 

and effective communication between industry and government. 

Human Intangibles 

My next two ingredients enter the area of what I will call subjective human intangibles. These intangibles also are manifested in what we call organizational cultures. One could generate a pretty long list of the human 

qualities needed for successful innovation. The list might include innate 

intelligence, creativity or the ability to think “out of the box” and curiosity, to name just a few such qualities. These address the capacity to have a 

new idea. A great deal of work has gone into structuring organizational 

environments to encourage and foster creativity. This can include physical 

arrangements, workplace layouts, and a range of approaches intended to 

foster cultural norms that support creativity. 

Some companies use problem-solving tests to identify candidates with 

high creativity. I believe all this work has merit, but I also think its goal is 

to select creative people and to draw out the inherent creativity that people 

either do or do not possess. I’m only going to mention two human qualities 

that I think have great importance, and that DoD managers at all levels 

should be especially conscious of: risk tolerance and persistence. 

Accepting Risk 

I was asked by a reporter during an interview 2 or 3 years ago if the DoD 

was taking too much risk in its programs. My response was that we are not 

taking enough risks. With respect to our major programs, I find myself 

pushed in two directions simultaneously by the political winds in Washington. At the same time that I am told the expectation for all our programs is to have no schedule slips or cost overruns, I also am told that we 

should go much faster in our programs and not have so much oversight. I’m 

sorry, but you can’t have it both ways. 

To me, both perspectives miss the point. Development of new products, 

particularly a new generation of cutting-edge and militarily dominant 

systems, cannot be made risk free. If we want risk-free defense acquisition, we should just buy fully developed products from other countries. 

If, on the other hand, we want the best military in the world, and one in 

which our warfighters always have innovative and dominant equipment, 

then we are going to have risk in our programs. 
28 

Getting Defense Acquisition Right

One of our program managers’ most important responsibilities is to understand and proactively manage the risk inherent in any development 

program. (I wrote about that responsibility in an article in the July-August 

2015 issue of Defense AT&L magazine.) To borrow a line from the movies, 

the secret of life is balance. We have to balance risk against urgency and 

resource constraints. If we are too cautious, our programs will take forever 

and be too modest in their ambitions. If we gamble wildly, we will waste 

precious resources and not meet our objectives. 

At the enterprise level in DoD today, there is strong support for accepting 

the risk of embarking on a number of what I will call advanced technology 

demonstration programs. The recently completed Long Range Research 

and Development Planning Program has recommended several advanced 

technology demonstration programs for consideration in the Fiscal Year 

(FY) 2017 budget. Similarly, the Strategic Capabilities Office is proposing 

demonstration programs based on novel applications of currently fielded 

systems or those in development. In the FY 2016 budget, I was able to secure funding for the Aerospace Innovation Initiative that will culminate 

in X-plane-type and propulsion technology demonstrators that will create options for the systems subsequent to our current Joint Strike Fighter 

program. This fall, all of these demonstration proposals will collide with 

budget reality at the President’s Budget request level. Needless to say, if sequestration occurs, that collision will be even more violent. In some cases, 

we could reasonably accept more risk and move directly into Engineering 

and Manufacturing Development (EMD) programs instead of pursuing 

concept demonstration programs, but we simply don’t have the resources 

to conduct those EMD programs. 

Persistence 

The other intangible characteristic successful innovators demonstrate is 

persistence. When innovators encounter obstacles, they find ways through 

or around them. Two obvious historical examples are Thomas Edison and 

his quest for a practical light bulb, and the Wright brothers and their pursuit of controlled, powered flight. (David McCullough has written a new 

book chronicling the Wright brothers’ tenacious pursuit of powered and 

controlled flight.) 

The DoD has sometimes been criticized for sticking with programs that 

encounter problems. The F-35 fighter is a current example. Earlier ones 

in my experience include the C-17, the Advanced Medium-Range Air-toAir Missile, and the F-18E/F fighter. In all those cases, we persevered and 

achieved good results. In other cases, we have stopped programs that, in 

retrospect, we probably should have continued. In still other cases, we kept 

going for far too long on programs that should have been canceled earlier. 
29 

Chapter One: Getting Acquisition Policy Right

In general, my sense is that, for most programs, we can get to a product 

that meets our requirements if we have the patience and persistence to continue. There are exceptions, however. 

There is an important difference between the persistence applied to commercial innovation and that applied to innovative products in DoD. For 

commercial products, both in start-ups and large corporations, the decision to continue product development when problems are encountered is 

driven by the judgment of the management (influenced by persistence and 

risk tolerance) and by the resources available to the firm. In DoD’s case, 

these decisions have a high political content—both internally and externally. My observation is that the politicization of these decisions does not 

generally lead to better results. We also have frequent leadership changes—which makes persistence in the face of difficulties more problematic. I 

have no solution to offer for all this other than to continue the work of the 

last several years to ensure we don’t start unaffordable programs, and to 

manage risk professionally and proactively in our development programs. 

The DoD spends taxpayer-provided money; we will always be under close 

public scrutiny, and we will always have internal competition for resources. 

Collaboration 

Innovation, in the commercial and the DoD context, tends to be based on collaboration. Multiple technical disciplines often have to come together, and 

the synergy between multiple disciplines may be the central feature of the 

innovative idea. In the DoD, technical ideas only reach the market when the 

using military Service decides to embrace the new concept or new product. 

This is not quite the same as the commercial market where “early adopters” 

from a large customer base may help a technology establish a foothold and 

gain credence. Commercial entrepreneurs build the better mouse trap first 

and expect customers to come. In DoD the customers, the military Departments, ask for fairly specific products and then budget the resources to pay 

for the development of those products. 

The DoD also uses a formalized requirements process that is based on the 

perception of “gaps” in capability. Requirements are generated to fill these 

perceived gaps. This approach tends to be self-limiting and to discourage 

new concepts and innovative approaches that deviate from existing paradigms. Henry Ford’s famous quip that if he had asked his customers what 

they wanted it would have been a better horse has some relevance here. 

The fact is, however, that despite our formal process, requirements are often based on the priorities of senior Service leadership. For this reason, I 

welcome the initiative from the U.S. Senate to increase Service leadership 

involvement in acquisition. 
30 

Getting Defense Acquisition Right

A strong collaboration between Service leadership and the technical acquisition community, starting as early in the product life cycle as possible, is 

essential to effective innovation in the DoD, and it is a component of Better 

Buying Power. I would also add that close collaboration with the intelligence community is critical as well: Potential adversaries are moving very 

quickly to develop products clearly designed to defeat U.S. capabilities. The 

DoD must be both innovative and quick to market in responding to these 

emerging threats. Achieving these objectives requires strong and continuous collaboration between operators, the intelligence community and the 

technical acquisition community. 

Funding Is Fundamental 

There is one more necessary ingredient that I have not discussed yet. That 

ingredient is capital. Small start-ups and large businesses alike depend 

on capital to survive and to bring new products to market. So it is for the 

DoD, and this is my greatest concern today. Our capital comes from the 

budgets we receive from Congress. As long as we remain trapped in the 

grip of sequestration and as long we continue to prepare budgets that are 

far out of alignment with the funds we may receive, we will not be able to 

innovate effectively. 

Innovation isn’t just about thinking outside the box, or about demonstrating new technologies and operational concepts. It is about developing, producing, fielding and training with those new capabilities. Today I believe 

our pipeline of new products in development is inadequate to deal with 

emerging threats. We are facing a major recapitalization bill for the strategic deterrent that is about to come due. There is nothing that I or the DoD 

can do to improve our productivity and efficiency that will fully compensate for inadequate capital. All the efficiencies I can even imagine will not 

make up this shortfall. By conducting well-chosen demonstrations, we can 

reduce the lead time to acquiring real operational capability, we can keep 

an essential fraction of our industrial base gainfully employed, and we can 

position ourselves for changes in threat perceptions and the availability of 

additional funds. But, without relief from the specter of sequestration, we 

cannot increase the relative combat power of the United States against our 

most capable potential adversaries. 

I can point to numerous places in DoD where we are taking steps to improve our access to and use of each of these ingredients: knowledge, freedom, risk tolerance, persistence, collaboration and capital. For the last few 

years, we have worked hard to emphasize and increase the professionalism 

of the government acquisition workforce. Secretary Carter’s “Force of the 

Future” initiative is specifically intended to bring high knowledge people 

into our workforce. With help from the Congress through the Defense 
31 

Chapter One: Getting Acquisition Policy Right

Acquisition Workforce Development Fund and a number of internal actions, we have continued to build on our strong foundation in this area 

despite budget constraints. 

We are protecting and emphasizing the freedom of our managers to find 

creative solutions to technical and managerial problems. Last year, I tasked 

each of our program managers to communicate directly with me about 

problems, issues and recommended solutions. The result was a huge testament to the creativity, dedication and professionalism of our workforce. 

The demonstrations that I mentioned, if they can be funded, show our 

willingness to take risk on new and nontraditional approaches to operational problems. Deputy Secretary Work’s “Third Offset” strategy, by its 

very nature, will require the DoD to accept the risk associated with new 

operational concepts and the technologies that enable them. Our ability 

to persist in bringing all of these initiatives to fruition remains to be seen, 

but the closely aligned leadership in the DoD—including the Secretary and 

Deputy Secretary of Defense, myself, and the new Joint and Service uniformed chiefs—makes me optimistic that we can collaborate to do so. 

From their inception, the Better Buying Power initiatives, in every edition, 

have been about getting the most value possible from our available capital. 

With that possible exception—which is in the hands of the Congress—we 

possess or can obtain all the ingredients we need to bring innovative solutions to our warfighters. 
32 

Getting Defense Acquisition Right

Real Acquisition Reform 


(or Improvement) Must 


Come From Within
 

Reprinted from Defense AT&L: May-June 2016 

Since I returned to government 6 years ago, I have been working with the 

acquisition workforce and defense industry to improve defense acquisition 

performance. There is a lot of evidence that we are moving in the right 

direction. We have also effectively partnered with Congress on some initiatives, and we are in the midst of a new cycle of congressionally led efforts to 

improve defense acquisition—as in other cases with the label of “acquisition reform.” 

I would like to share some thoughts with you about the limitations of legislative tools, and also explain why I believe that lasting improvements must 

come from within the Department of Defense (DoD)—from our own efforts. 

Legislation can make our job easier or harder, but it can’t do this job for us. I 

recently was asked by Chairman Mac Thornberry to attend a roundtable on 

acquisition reform with the House Armed Services Committee. This article 

is based in part on the thoughts I communicated to the committee. 

First of all, what it takes to be successful at defense acquisition isn’t all that 

complicated—to first order at least. It consists of just these four items: (1) set 

reasonable requirements, (2) put professionals in charge, (3) give them the 

resources they need, and (4) provide strong incentives for success. Unfortunately, there is a world of nuance and complexity in each of these phrases 

and words. They also apply to both government and industry organizations, but not always in the same way. The fact is that none of this is easy. 

Reasonable requirements are not all that simple to create, professionals 

don’t exist by chance, resources are subject to budget vagaries and other 

constraints—including a predisposition toward optimism—and incentives 

are complicated and often have unintended consequences. The work of 

making each of these four imperatives real for a given program is not easily 

accomplished, even with strong hands-on leadership. It is even harder to 

influence through legislation. I have some sympathy—and even empathy— 

for the difficulty that the Congress and our oversight committees face when 

they try to “reform” defense acquisition. Congress has two major challenges as it tries to improve acquisition results. The first is the structure of the 
33 

Chapter One: Getting Acquisition Policy Right

defense acquisition enterprise itself. The second is the inherent limitation 

on the set of tools they have to work with to effect change. 

One way to imagine the defense acquisition enterprise is as a layered construct. At the base of this tiered structure are the organizations and people 

that do the actual work of delivering products and services. These people 

and organization are almost all defense contractors. (I’m oversimplifying a 

little here—some services and products are provided within government, but 

this is an exception.) The next layer consists of the government people who 

actually supervise the defense contractors. This second layer is also the layer 

at which requirements—a critical input to the acquisition structure I’m describing—directly impact the work. There is a huge variety of contracted services and product acquisitions, and the government people who plan, issue 

and administer contracts cover a broad spectrum of roles and professional 

expertise. These two layers are where the action occurs in terms of delivering 

products and services. Everything else in the acquisition structure is about 

making these two layers function as effectively as possible. 

Above these layers there are chains of command and direct stakeholders 

of many types, most but not all of whom are located in the organization 

(military department or component) acquiring the service or product. 

Next there is a layer of what we like to call “oversight” within the DoD, 

some of it in the Office of the Secretary of Defense but also a great deal of it 

distributed in the military departments and agencies. My own position as 

Under Secretary is a mix of acquisition chain of command responsibilities 

and policy or oversight. 

Finally, at the top of the whole structure, and furthest from where the work is 

done, there is the Congress, which has statutory authority over the DoD and 

the entire Executive Branch and conducts its constitutional oversight role. 

In order to achieve its objective of improving acquisition, Congress has 

to penetrate through all the other layers to get to those where the work is 

done. This isn’t an easy task. The DoD’s relationship with our contractors 

is defined primarily by contracts, so one route available to the Congress 

to improve acquisition is to write laws governing defense contracts. These 

laws then are turned into regulations in our Defense Federal Acquisition 

Regulation Supplement (DFARS) by people in the oversight and policy 

layer and implemented by the management layers that are in more direct 

contact with defense contractors. 

As a practical matter, Congress tends to react to events as they occur by 

passing additional statutory provisions. Congress also tends to make 

changes or additions whenever committee leadership, members and staff 

change. Of course, lobbyists for industry and other interests play a role 
34 

Getting Defense Acquisition Right

in this process. The result over time is a frequently changing, but usually 

increasingly complex compendium of almost 2,000 pages of DFARS regulations governing how the DoD contracts for work. A serious effort at acquisition reform would include a complete review of everything in both 

the Federal Acquisition Regulations (FAR) and DFARS with the first-order 

goal of simplification and rationalization and the second-order goal of 

eliminating as much content as possible. 

This task would take a good-sized, knowledgeable team up to a year to 

complete and it would take at least a year more for review and modification 

to the resulting product. The DFARS is based on the FAR, of course, so this 

would need to be a federal government, not just a defense, endeavor. I believe this task is worth undertaking, but no one should expect it to achieve 

miracles; almost everything in the FAR and DFARS is there for a reason— 

usually as an expression of policy goals that are considered worthwhile. 

The tough questions have to do with whether the costs of all these provisions in terms of inefficiency, higher barriers to entry for industry, and 

taxpayer expense are outweighed by the benefits achieved. We may only be 

able to eliminate a subset of existing provisions, but what we could do for 

certain is have a more consistent, coherent and easily applicable body of 

regulations. Over time, I have no doubt that Congress would continue to 

add legislation that would take us down the same path of increasing complexity; a “reset” every decade or so would be necessary, but I still believe 

the effort would be of value. 

In addition to influencing how the DoD contracts with industry, Congress 

also attempts to improve acquisition by legislating rules that affect the government oversight layers and the people in them. This indirect approach 

is based on the premise that oversight and supervisory bodies can have a 

positive or negative impact on acquisition performance and that laws can 

in turn improve the performance of those layers. The Weapons Systems 

Acquisition Reform Act (WSARA) was of this nature. It addressed the 

systems engineering and developmental test and evaluation offices and it 

created the Performance Assessment and Root Cause Analysis organization (all within the Office of Acquisition, Technology, and Logistics), for 

example. Congress also has taken some steps to improve professionalism 

of the government management team by mandating tenure for program 

managers and selection rates for acquisition corps officers. Many of the 

steps Congress has taken, like these, have in fact been helpful. 

The more indirect approach to improving acquisition by redesigning oversight structures and processes also suffers from the problem that it only impacts what happens in the top layers of the structure—not the layers where 

the work is done. Many outside observers seem to confuse the efficiency of 
35 

Chapter One: Getting Acquisition Policy Right

the defense acquisition system, (i.e., the process by which program plans 

are approved and program oversight is executed), with the fact of cost and 

schedule overruns on particular programs. I sometimes make the point 

that the DoD only has two kinds of acquisition problems—planning and 

execution. The burden on the military department or component of preparing a plan and getting it approved is an overhead cost we should seek 

to reduce, but that burden shouldn’t be confused with the failure to deliver 

a product or service on time and within cost. Where the DoD’s oversight 

structure falls short is when it approves an unrealistic plan and thereby 

fails to prevent overruns and schedule slips. The oversight mechanisms 

succeed when they produce a more affordable and executable plan. I think 

we are fairly successful in this regard. Execution itself is where we most 

often have problems—and that is squarely the responsibility of contractors 

we hire and the government people who supervise them—in the bottom 

two layers I described. Changing the oversight layer’s structure and processes can improve our planning, but it doesn’t lead to better execution. 

In my experience, some of Congress’ efforts to improve acquisition have 

been problematic in three ways. In order of significance they are: (1) imposing too much rigidity, (2) adding unnecessary complexity and bureaucracy, 

(3) failing to learn from experience. 

A lot of the work we have done over the past several years has been to 

identify and promulgate best practices, but a point I have made repeatedly is that the DoD conducts such a huge array of contracted work that 

it is counterproductive to impose a one-size-fits-all solution or way of doing business on everything that we do. Imposing rigid rules and universal 

practices is counterproductive. Overly proscribing behaviors also has the 

unintended impact of relieving our professionals of the core responsibility to think critically and creatively about the best solution to the specific 

problems they face. 

One thing the DoD is very good at is creating bureaucracy. New procurement laws lead to the creation of more bureaucracy. Last year we provided 

Congress with a number of recommendations to remove reporting requirements and bureaucracy in the acquisition milestone decision making process that our program managers go through. Many of these recommendations were included in the Fiscal Year (FY) 2016 National Defense 

Authorization Act (NDAA). Unfortunately, while some requirements were 

removed more were added. As indicated above, the overhead we impose 

on our managers does not directly impact the cost or schedule to complete a program or deliver a service, but it does have the secondary impact 

of distracting our managers from their job of getting the most out of our 
36 

Getting Defense Acquisition Right

resources, and it does increase overhead costs. Frankly, I think we have 

enough rules; we need fewer rules—not more. 

I’ve also been in this business long enough to have seen multiple cycles of 

acquisition reform. I tell a story sometimes about the first congressional 

hearing I ever attended. It was in 1980. I vividly remember someone on 

the committee holding up a program schedule and ranting about the presence or absence of concurrency between development and production. He 

was very passionate, but I don’t recall if he was for or against having more 

concurrency. We’ve been both for and against high degrees of concurrency several times over the years. Concurrency is one of the many judgments best left to professionals who understand the risks in a particular 

new product design and the urgency of the need. I also spent several years 

cleaning up the messes left behind in the late 1980s by an early round of 

self-imposed fixed price development contracting, which at one time was a 

presumed panacea to overruns in development. It was a disastrous policy 

that we swore we would never try again. 

The sign outside my door, “In God we trust, all others bring data,” isn’t 

there as a joke. We need to learn from our experience, and the data tell us 

very clearly that fixed price development is usually, but like everything in 

acquisition, not always, a bad idea. We should not be making arbitrary acquisition policy changes under the guise of reform just because we are not 

fully happy with the results we’ve seen recently. Doing something different 

ought to reflect a factual basis for thinking that change will make things 

better. At the very least, novel ideas should be tried on a small scale in pilot 

programs before they are mandated more broadly. We need to learn from 

our experience, and, in general, passing laws that force us to repeat unsuccessful experiments is not wise. 

Let me come back to where I started, with a description of what it takes 

to succeed in acquisition. Requirements drive what we acquire and they 

are set by our customers—the warfighters and the organizations that use 

the services or products we procure. Setting reasonable requirements that 

meet user needs operationally but are still achievable within a specified 

timeframe, consistent with the need at an affordable cost is a matter of 

good professional judgment. These judgments can’t be legislated. They 

occur when operators, intelligence experts, acquisition professionals and 

technologists work together. 

Creating complex new defense products that provide technological superiority is a job for true professionals, in industry and government. It is very 

hard to write a law that makes someone a better engineer or program manager. We have to develop these professionals over their careers in industry 

or government. Adequate resources are a concern of Congress, but they are 
37 

Chapter One: Getting Acquisition Policy Right

authorized and appropriated in the context of the budgets the DoD submits. Historically, our greatest failing in building those budgets has been to 

be too optimistic about the resources we needed to deliver a product or service successfully, or about what we expected we could afford in the future. 

Sound cost estimating, rational affordability constraints and leadership 

that insists on the use of realistic costs also are hard to legislate. Incentives for acquisition success in government come from the dedication of 

our workforce members and how they are encouraged and rewarded by the 

chain of command and their institutions. Again, this is about leadership, 

not legislative rules. For industry, it is a matter of aligning financial incentives with the government’s objectives in a way that successfully improves 

contractor behaviors. And this requires professional judgment that must be 

tailored to the individual situation—not something that can be directed in 

legislation with broad applicability. 

The bottom line of all this is that there won’t be meaningful acquisition 

improvement except by our efforts. Congress can make things easier or 

harder, but this is still our job. We should be encouraged by the fact that 

we have made a great deal of progress over the last several years. The data 

support both that we are making progress and that there is still room to improve. As an example, we recently calculated the net Major Defense Acquisition Program overrun penalty for the Services that the FY 2016 NDAA 

directed. As of today, because of the savings we have achieved, we have 

built up a “credit” of more than $25 billion in underruns across the DoD. 

We also have some programs that have come in above their predicted costs, 

but the number of programs in which we are beating our original projections for Program Acquisition Unit Cost outnumbers the programs where 

we are seeing overruns by about 2 to 1. We need to stay on course; keep up 

the good work. 
38 
39 

Chapter Two
 

Building Professionalism in 


the Acquisition Workforce
 

“I happen to think we’ve set our ideal on the wrong objects; 


I happen to think that the greatest ideal man can set 


before himself is self-perfection.”
 

—W. Somerset Maugham, “The Razor’s Edge”
 

In the second version of Better Buying Power, I added a category of initiatives associated with building professionalism. I was not implying that our 

workforce lacked professionalism—quite the contrary. What I wanted to 

communicate was the importance of constantly improving our capability; 

all of us can always improve our capabilities as professionals. Doing so is 

one of our jobs. Even more important, we need to help the people who work 

for us to grow in their own professional capacities. I firmly believe that the 

most important legacy any government acquisition professional can leave 

behind is a more professional workforce then he or she inherited. I also 

wanted to communicate to outside pundits, critics, and stakeholders, and 

even other defense communities, that all aspects of acquisition, including 

program management, engineering, contracting, testing, manufacturing, 

and logistics require qualified professionals to achieve success. 

The first piece in this chapter addresses professionalism itself. What makes 

the people who work in each of the dozen or so fields associated with the 

acquisition workforce professional? My answer includes specialized knowledge, standards of performance, the ability to deal with complexity, a distinct culture of continuous improvement, and high ethical standards. In 

the following article in this chapter, I discuss in more detail some of the 

ethical standards that apply particularly to acquisition professionals. 

The next article provides some real life examples of acquisition professionals at work. Each year I ask each of the Program Managers for our larger 

programs to write a short assessment of their programs. The total number 

of assessments is around 150. I read each one and reply to each Program 

Manager. Many are sources of ideas that can be applied more broadly. 
40 

Getting Defense Acquisition Right

Sometimes they illuminate problems that can be solved with more senior 

intervention. In nearly every case, they reflect the range of problems, the 

complexity of those problems, and the dedicated and effective way these 

acquisition professionals are performing their duties. This article summarizes specific Program Manager experiences in the areas of high-risk 

development, incremental acquisition of specialized software, the unique 

problems associated with a space system, and the sustainment, 20 years 

after it was acquired, of a commerical-off-the-shelf product adapted for 

military training purposes. 

From the Program Managers’ assessments, we move up the chain of command to Program Executive Officers (PEOs) who are responsible for a portfolio of programs, usually with similar characteristics. All of our roughly 

50 PEOs were asked to provide assessments of their portfolios and recommendations for improvement. If the reader is interested in real acquisition reform (improvement), this is the one section that I would consider 

mandatory reading. The PEOs have more experience as professionals and a 

broader portfolio, so they are more inclined to see and focus on problems 

with wider impact than a single program. Arranged alphabetically by topic 

and largely as reported by the PEO, this section covers a broad range of 

areas where the PEOs see opportunity for improvement. This is the work 

of a very professional group of people. Their suggestions were acted upon. 

I close this chapter with a tribute to some exemplary acquisition professionals who have left government service. The individuals whose careers 

and contributions I describe include two civil servants and two officers. All 

had exceptional careers. They are representative of the fine professionals 

in the nation’s acquisition workforce. It is a privilege to work with people 

like this. The United States is fortunate to have such a remarkable cadre of 

government acquisition professionals and many equally dedicated industry partners. 
41 

Chapter Two: Building Professionalism 

in the Acquisition Workforce

What Does It Mean To Be “a Defense 

Acquisition Professional”? 

Reprinted from Defense AT&L: March-April 2014 

One of the seven goals of Better Buying Power 2.0 is to improve the professionalism of the total acquisition workforce. I thought it might be useful to 

provide some specificity about what I have in mind when I talk about professionalism. The following is based on various experiences over my career, 

including some formal education on the nature of professionalism in the 

military, including at venues like West Point and the Army War College, in 

my on-the-job training in program management and systems engineering 

by various Air Force colonels in the Ballistic Missile Office, and by mentors 

in the Army’s Ballistic Missile Defense Systems Command. I don’t intend 

this to be an academic discussion, however, but a hands-on practical application of the term “professional” in the context of defense acquisition. 

Defense acquisition professionals have a special body of knowledge and 

experience that is not easily acquired. Other professions such as attorneys, 

physicians, and military officers also have this characteristic. The situation for defense acquisition professionals is analogous. This characteristic applies equally to professionals in program management, engineering, 

contracting, test and evaluation, and product support, to name our most 

obvious examples. One should no more expect a lay person to make good 

judgments about something in these acquisition fields—be it a program 

structure, a risk mitigation approach, or the incentive structure of a contract—than one would expect an amateur to tell a lawyer how to argue a 

case, or a brain surgeon how to do an operation, or a brigade commander 

how to organize an attack. No one should expect an amateur without acquisition experience to be able to exercise professional judgments in acquisition without the years of training and experience it takes to learn the 

field. Like these other highly skilled professions, our expertise sets us apart. 

Defense acquisition professionals set the standards for members of the profession. One of the reasons we are establishing “qualification boards” for our 

various key senior leader fields is to infuse a greater element of this characteristic into our workforce. Our senior professionals should know better than 

anyone else what it takes to be successful as a key acquisition leader. A professional career-field board will make the determination, in a “peer review” 

context, whether an individual has the experience, education, training, and 

demonstrated talent to accept responsibility for the success of all, or a major 

aspect of, a multibillion dollar program. This is not a minor responsibility. 
42 

Getting Defense Acquisition Right

These new boards are an experiment at this stage, but I am hopeful that they 

will take on a large share of the responsibility for enhancing and sustaining 

the expected level of preparation and performance of our key leaders. The 

boards will be joint, so that our professional standards are high and uniform across the defense Services and agencies. Setting standards for other 

members of the profession also encompasses the development and mentoring responsibilities that leaders at all levels, including AEs, PEOs, and other 

acquisition leaders, take on to strengthen and maintain the profession. They 

know that their most important legacy is a stronger—and more professional—workforce than the one they inherited. 

Defense acquisition professionals know how to deal with complexity. The 

problems we have to solve are not simple—we are developing and fielding some of the most complicated and technically advanced systems and 

technologies in military history. It is therefore an illusion to believe that 

defense acquisition success is just a matter of applying the right, easily 

learned “cookbook” or “checklist” approach to doing our jobs. There are 

no fixed rules that apply to all situations, and as professionals we know 

that a deeper level of comprehension is needed to understand how to make 

good decisions about such issues as technical risk mitigation, what incentives will best improve industry’s performance, what it will take to ensure 

that a product is mature enough to enter production, or how much testing 

is needed to verify compliance with a requirement. It is not enough to know 

acquisition best practices; acquisition professionals must understand the 

“why” behind the best practices—that is, the underlying principles at play. 

Many of our products consist of thousands of parts and millions of lines 

of code. They must satisfy hundreds of requirements, and it takes several 

years to bring them into production. Understanding and managing complexity is central to our work. 

Defense acquisition professionals embrace a culture of continuous improvement. The concept of continuous improvement should apply to our 

own capabilities as individuals, to the teams we lead, to the processes we 

create and manage, and to the acquisition outcomes we seek. Better Buying 

Power is built on the idea of continuous improvement, of measuring performance, of setting targets for improving that performance, and striving 

to reach them (“should cost” for example). We are willing to examine our 

own results and think critically about where we can achieve more, and we 

have the courage and character to learn from our mistakes and to implement constantly ideas for better performance. As leaders we encourage 

these behaviors in the people who work for us and who collaborate with us. 

Defense acquisition professionals practice and require ethical standards 

of behavior and conduct. Our ethical values guide how we interact with 
43 

Chapter Two: Building Professionalism 

in the Acquisition Workforce

one another, with our supervisors, with industry, and with stakeholders 

including the public, media, and Congress. An Under Secretary whom I 

worked for decades ago told me once that when you lose your credibility 

you have nothing left—and you won’t get it back. We must speak truth to 

power about problems within our programs and about ill-advised guidance that will lead to poor results. Successful acquisition requires a culture 

of “telling bad news fast,” and that values accountability without a “shoot 

the messenger” mentality. Finally, it is particularly important that we treat 

industry fairly and with complete transparency. 

I hope that this doesn’t all come across as either preachy or aspirational. I 

believe that these are realistic expectations for defense acquisition professionals. I believe that they go a long way to defining what being a professional really means. My West Point class (1971) motto is “Professionally 

Done.” I have always thought that this is a pretty good motto, and a pretty 

good way to look back on a successful career or a completed project, including in defense acquisition. 
44 

Getting Defense Acquisition Right

Ethics and Acquisition 


Professionalism—
 

It Is All About Trust
 

Reprinted from Defense AT&L: September-October 2014 

One of my predecessors as Under Secretary for Acquisition, Technology, 

and Logistics, and my former boss, John Betti, once commented to me, 

“The most valuable thing any one of us has is our credibility; once credibility is gone, it can never be recovered.” 

Credibility, or our capacity to have other people trust what we say, is essential 

to any successful acquisition professional. Trust in our credibility matters 

when we interact with our supervisors, subordinates, customers (military 

operators), the media, Congress and industry—in other words with everyone we encounter. Once we lose credibility with any one of these groups, we 

aren’t far from losing it—and our effectiveness—with all of them. 

There are a lot of ethics-related topics I could write about. I’ve chosen this 

one partly because of its importance, but also because of the frequency 

with which I’ve seen problems in this area and finally because it takes us 

into an area where there are a lot of shades of gray. I won’t say much about 

the basic rules we are required to follow as a matter of integrity and public 

confidence, but I will mention them briefly. If you are a dishonest person 

who would violate fundamental ethical requirements, say by accepting 

a bribe in some form, then there probably isn’t anything I can write that 

would change that fact. If you are likely to yield to that sort of temptation, 

we will do all that we can to catch you and put you in jail. If that doesn’t 

deter you, I don’t think an article will have much effect. 

Sustaining trust in our integrity as public servants also demands that we 

be very careful about avoiding any appearance of unethical conduct. We 

are reminded of these requirements frequently and all of us should follow 

them. The ethical problems I’d like to address instead involve times when 

one of us might be tempted to do something wrong in our professional lives 

because of a goal we believe has real merit; in other words, to rationalize 

that good ends justify unethical means. In my experience, those unethical 

means often involve misleading a decision maker, authority or stakeholder 

in some manner. People generally don’t go to jail for this type of behavior and we aren’t talking about appearances only. The people who commit 
45 

Chapter Two: Building Professionalism 

in the Acquisition Workforce

these ethical lapses do, however, sacrifice their credibility—and sometimes 

their careers. 

I’m sometimes asked about why the government or, more specifically, 

the Office of the Secretary of Defense, doesn’t trust one party or another 

more—or even why I personally do not do so. When I’m asked this, it is 

usually in the context of someone asking for a decision such as a business 

commitment, or reducing the oversight used, or a milestone delegation, 

or agreement to limit risk mitigation activities and expenses. The party 

asking can be someone from industry or a military department program 

manager or another senior leader. The answer, I’m afraid, is simple enough: 

experience. 

My life in the military, government and industry taught me that it isn’t wise 

to give trust away for free; it should be earned. We are all involved in situations where we are trying to persuade someone to accept our point of view. 

It can be for approval of a milestone or authorization of funding or continuation of a program. There can be strong temptations in these cases to 

be something less than fully honest. This is the gray area I want to discuss. 

I’ll start with what I consider unethical attempts to influence decision makers or stakeholders. The extreme form of this is simply lying. I have very 

rarely, as far as I know, been directly lied to by a government acquisition 

professional. I did have one well-reported occasion when direct lying was 

practiced. It originated in a program executive office associated with the 

infamous Navy A-12 program. That individual was relieved and forced to 

retire when it was revealed that he had directed his subordinates to report 

lies about the program. 

It shouldn’t be necessary for me to exhort anyone in defense acquisition 

not to cover up problems in a program by actively lying about them. If you 

are doing that, my advice to you is to get out of our profession. The rest of 

us do not want to work with you. The form of ethical lapse I have seen too 

often consists of more subtle attempts to mislead decision makers in order 

to obtain a desired result. There are two forms of conduct that in my experience are much more common. The first is simply omitting information 

that would support a conclusion that is different from the desired one. The 

second one I’ll refer to as “marketing,” which falls short of direct lying but 

not by a wide margin. 

I think I’m a realist, and I know that when a Military Department asks me 

for a decision when it has already decided what that decision should be. 

As the Defense Acquisition Executive (DAE), I’m not being asked by the 

Service to figure out the right decision; I’m being asked to ratify the one the 

Service believes it has already effectively made. 
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Getting Defense Acquisition Right

Going back to John Betti for a moment, John came into the Department 

of Defense (DoD) from a nondefense company where he was a senior executive. Originally, John approached his job as DAE as being similar to a 

corporate chief executive officer being asked to make a decision about an 

investment for a company. I explained to John that DoD worked a little differently. I told him he should think of it more as if he were a banker being 

asked to approve a loan. 

The applicant (Service) already knows it should get the loan; its only interest is in getting the loan approved. There is no incentive for a loan applicant to explain in detail all the reasons his credit rating is overstated or 

to emphasize risks that the business plan might not be successful. Despite 

this disincentive, we do have an ethical obligation to provide senior decision makers with all the relevant information they should have before they 

can make an informed decision, whether or not it supports the decision we 

would prefer. In this regard, the best way to ensure credibility is to tell the 

whole story. It’s fine to make recommendations, and even to advocate for a 

decision you support, but it is not fine to omit important facts of which the 

decision maker should be aware before he or she makes the decision. 

Another of my bosses was Dr. John Deutch, also a former Under Secretary 

for Acquisition. John is one of the smartest people I’ve ever met. When I 

worked for him, John had a habit, however, of leaping ahead on a subject 

and reaching a conclusion before I could give him all the information he 

needed. On more than one occasion, I had to physically grab him and insist 

that he have the patience to wait for some more information from me before making a decision. Even if I thought he was right and making the decision I supported, I still wanted him to have all the relevant information. 

This was partly out of self-interest as well as a sense of the duty I owed to 

my boss. If I didn’t give him the full story and his decision was later proven 

wrong by events, I didn’t want to be in the position of not having given him 

all the relevant data—my future credibility with him was at stake. 

The second type of behavior I see fairly often can be described as “marketing.” A friend of mine in business was once appalled at the lies her associate was telling a prospective client. When challenged, the sales person 

responded, “That wasn’t lying; it was marketing.” In this case, what I’m 

referring to is a little more of a gray area; it consists of claims about judgments, such as risk levels, or future implications of decisions that stretch 

the truth instead of breaking it. 

More extreme versions of “marketing,” as opposed to objective presentation, 

are easy to spot. It doesn’t take too many questions to find out whether there 

is real substance behind an assertion or, to use a phrase from the legal world, 

to discover that the claim being made is “mere puffery.” I’ve found it to be an 
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important practice to try to find out if a program manager (PM) is trying to 

“sell” me, or if he or she is really on top of the program and has a real basis for 

the assertions made. (As a style comment, a “just the facts ma’am” delivery 

works a lot better with me than that of a used car salesman.) 

Most PMs are very professional about this; some are not. Once a PM told me 

his optimistic schedule projection was made because he planned to do things 

“differently.” Unfortunately, when I probed a little more deeply, he had no 

specifics whatsoever about what he was going to do “differently.” In short, we 

shouldn’t make claims we can’t back up just to get someone’s approval. 

In another instance, a PM told me the new design turbine engine for his 

UAV [unmanned aerial vehicle] program was low-risk because it had over 

100 hours of testing on a prototype. I asked him based on past experience 

how many hours of testing a new engine should have before it is ready to 

enter serial production. He had no idea. (Hint: It’s a lot more than 100.) 

It doesn’t take too many questions to find out if a PM, or anyone else, knows 

his business and has done his or her homework. If you haven’t done your 

homework and get caught trying to fake it, you can forget about trust or 

credibility as an asset. 

I’ll also mention similar behaviors that don’t occur as often, but which I 

have seen, including relatively recently. One that particularly galls me is 

the “let’s hope he doesn’t read it” approach to getting something approved. 

Occasionally people will insert an action that they know I’m likely to disagree with into a document in the apparent hope I will miss it and grant approval. Even if I discover what I’ve done later, I would be in the unfortunate 

position of having to reverse myself. This doesn’t happen often, but when it 

does the major impact is that I will read all the documents from the same 

organization very carefully in the future. 

A variation on this approach is to insert elements into a program option 

the Service or the PM doesn’t support largely to make that option look less 

attractive from a cost or schedule perspective. I’ve seen this done to try to 

prevent congressional action that was opposed by the Service, and I’ve seen 

it done to try to dissuade me from a course of action I as the DAE thought 

was worth considering. When I see such actions, the organization does not 

earn my trust, nor do the responsible individuals. 

One other behavior I see on occasion is what lawyers call “the parade of 

horribles.” (Although I’m about 80 percent engineer, legal training provides some useful insights.) The phrase “parade of horribles” refers to the 

use in legal argument of a long list of all the really bad things that will 

happen if the judge makes a ruling the party opposes. These lists tend 

to be very speculative and inflated but not entirely fanciful. I do find it 
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amusing when I’m told that any decision to change a requested program, 

in any direction other than precisely the requested one, will have equally 

negative consequences for cost or risk. In short, adding a lot of weak or 

speculative arguments to a recommendation can have the opposite of the 

desired effect. 

While I’ve focused on some gray areas within my own interactions in the Department, the points I’m trying to make about earning and sustaining credibility apply equally well when we deal with outside stakeholders, especially 

Congress, industry and the media. For supervisors especially, please note 

that when we do any of the things I have described we are effectively training 

our workforce that these practices are “OK.” One reaps what one sows. 

The bottom line is that we should not let advocacy for a position, no matter 

how sure we are that it is correct, push us outside of ethical constraints. We 

don’t just need to tell the people we are responsible to the truth, we need 

to tell them the whole truth. We need to be clear about what we know and 

what we don’t know. We need to clearly distinguish between things we know 

and things we have informed opinions about. We must be able to back up 

our assertions with facts and sound logic or we shouldn’t make them. We 

certainly should not try to sneak anything by the people or institutions that 

make decisions we are bound by. Building our credibility as defense acquisition professionals is a career-long effort. Destroying it only takes a moment. 

John Betti was right; our credibility is our most valuable possession. 
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Program Manager Assessments—
 

Professionalism Personified
 

Reprinted from Defense AT&L: July-August 2015 

A few months ago, I decided to ask all of our Acquisition Category I and 

Major Automated Information System (MAIS) program managers (PMs) 

to provide me with a one- to three-page assessment of the state of their 

programs. At the time, this was an experiment. From the feedback I received, most PMs were delighted to have this opportunity. I have incorporated these assessments into Better Buying Power (BBP) 3.0 as an activity that will continue on an annual basis. The assessments are intended to 

strengthen the role of the acquisition chain of command. The assessments 

are simultaneously sent to me, the Service or Component acquisition executive, and the program executive officer. It was, however, an experiment 

that seemed to make a lot of people nervous. 

Some of the nervousness stemmed from concerns that I was putting the 

PMs in an awkward position, where they might fear that being too honest 

with me could jeopardize their program or get them into trouble with a 

senior stakeholder in the Service or on the Office of the Secretary of Defense (OSD) staff. I could understand this concern, and I hesitated briefly. 

However, one of the management principles I’ve picked up over the years 

(like the sign outside my door reading “In God We Trust, All Others Must 

Bring Data,” this comes from W. Edwards Deming) is that one must drive 

fear out of an organization to achieve success. No fear is more crippling 

or dysfunctional to an organization than fear of negative consequences of 

telling the truth. Close behind that is fear that a new idea will be dismissed 

or ridiculed. I decided that any institutional fear of the consequences of an 

honest assessment should not be appeased; it should be confronted. 

There was also a concern, which I took more seriously, that the PM would 

have to obtain approval and go through multiple drafts and reviews before 

being allowed to send me an assessment. To overcome this concern, I required each PM to certify to me that no one had reviewed the PM’s assessment in draft or final form. That seems to have been successful, although I 

expect I have caused some people to worry. 

The results, from my perspective at least, have been terrific. I’m still working my way through roughly 150 assessments, but I’ve already learned a 

great deal about Department of Defense (DoD) programs and the people 
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Getting Defense Acquisition Right

who are managing them. It was no surprise to me that the assessments have 

reflected the high degree of professionalism and dedication in our key leaders. I expected that. What I hadn’t expected, but probably should have, was 

the window these documents provide into the many complex challenges 

our PMs face, and the creative and innovative ways they are dealing with 

those challenges. In this article, I would like to summarize some of the 

inputs I received. They say a great deal about the work we are doing—and 

how well we are doing it. I hope, with the permission of the writers, to publish a subset of these assessments soon, but here is a sampling without the 

names of the programs or PMs. 

The cutting-edge weapon system; high-risk development: This assessment was probably the most impressive of the ones I have read to date. 

It was the smallest font the PM thought he could get away with—narrow 

margins, filled all three pages, and was packed with detail about the design, 

the technical issues and risks and what the PM was doing about them. It 

left me with no doubt that this PM was doing what Air Force Assistant 

Secretary Acquisition Bill LaPlante calls “owning the technical baseline.” 

After a short overview of the program, the PM dug into the precise risks 

he is managing and mitigating. It wasn’t quite a textbook or professional 

journal article on electrical engineering and systems engineering, but it 

was pretty close. One feature of this PM’s approach that is noteworthy, and 

a program management or systems engineering best practice, was the use 

of knowledge points associated with each technical risk area. The use of 

actual test results at sub-scale, component testing, modeling, simulation, 

and field testing were all described in fair detail. Key near-term tests were 

highlighted. This is not a low-risk program, and there are numerous ways 

for this design to encounter problems before it matures, but the PM left me 

with the strong impression that he is on top of the risks and well positioned 

to deliver this critical product. 

The legacy Command and Control (C2) system; incremental acquisition: 

This program is a large, complex C2 system that was built up over time from 

literally dozens of legacy systems. A few years ago, the idea of modernizing 

this collection in a “big bang” approach was rejected in favor of a lower-risk 

and lower-cost incremental approach (Model 2 of the new DoD Instruction 

5000.02). The PM has the challenge of coordinating and managing numerous interfaces with systems that cannot go offline, while rebuilding part 

of this conglomeration of applications and supporting infrastructure with 

the government in the role of lead system integrator. A Service-Oriented 

Architecture is being implemented in sections as infrastructure and legacy 

programs are replaced. This PM is dealing with several builds of software 

in various stages of maturity, testing, and fielding. He also is dealing with 

the transition of DoD traditional information assurance approaches to the 
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recently implemented Risk Management Framework. What this means on 

the ground is that the compliance measures have grown from about 100 

to more than 400. At the same time, the PM is reacting to the “cyber shift 

left” and other recently published Operational Test and Evaluation cyber 

procedures. In attempting to implement Agile software development practices this PM has run into constraints from MAIS and DoD acquisition 

processes that have stymied modern software development best practices. 

This PM is trying to do the right thing, but we’re getting in his way. He 

needs some help, and, because of his assessment, I plan to see that he gets it. 

The space; achieving stability: Our space systems generally have struggled 

to get through development and make the transition to production. This is 

often a challenging step in a product’s life cycle, but space programs have 

a particularly troubled history. Over the last few years, several DoD satellite systems have made this transition with great difficulty and are now at 

relatively stable phases of their life cycles. This PM’s program is no exception. Software and hardware issues caused major delays and overruns. These 

problems have been largely overcome and the program is in serial production for the space segment, but the PM has no shortage of challenges. The 

ground segment, an incremental software-intensive program, has lagged significantly and only now seems to be stabilizing. An aggressive team effort by 

government and industry has been required to deliver capability. The PM’s 

assessment reflects the successful use of Earned Value and Software productivity metrics to identify problem areas early and focus effort on corrective 

actions. While the PM generously (as I see fairly often) gives earlier versions 

of BBP some credit for his corrective actions, I would prefer less drama in our 

programs and less need for corrective action in the first place. 

Like many of our PMs, this one is managing several programs at once. In 

this case, they are various separable components of an integrated system. 

Each has its own prime contractor, its own business arrangements, its own 

technical challenges and its own place in the product life cycle. 

The Commercial Off-the-Shelf (COTS) product; sustainment 20 years 

on: Most of the attention in the acquisition system falls on programs in 

development, where delays and overruns are most likely, but where the 

contributions to life-cycle cost are lowest. This PM is dealing with a platform that has been in the inventory for almost 20 years. It is nearing the 

end of production and was based on a COTS product. The program has 

myriad supply chain, aging, and obsolescence issues. Originally a Contractor Logistic Support for life of the program (acquisition reform circa late 

1990s), the program has bounced back and forth between Federal Acquisition Regulation (FAR) Part 12 and FAR Part 15—ending up in Part 15. 

The program has moved to introduce competition for sustainment, but the 
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PM continues to deal with high costs of spare parts and issues associated 

with the commercial design that has not stood up well to military use. Bad 

assumptions (commercial product, life-cycle support by the producer) that 

may have reduced cost up front are being paid for now. The PM is dealing 

with a supply chain that sources nearly 500,000 parts and sees more than 

10,000 issues per month across the fielded systems. Moving to competition and standing up a new support contractor has been painful: Protests, 

claims, uncooperative suppliers, and intellectual property issues have all 

been problems. The PM has worked hard to understand the lessons learned 

from this experience and is preparing for the next round of competition. 

The bottom line: Sustainment is every bit as challenging as development. It 

demands attention to detail, strong leadership, tenacity, solid business acumen and innovation in dealing with support contractors. 

What I find fascinating about all of these assessments is the complexity and 

scale of the problems described and the candor and depth of understanding demonstrated by the writers. They personify the professionalism we all 

have to continue building throughout our workforce. BBP 3.0 focuses on 

innovation, technical excellence and the importance of U.S. technological 

superiority, while continuing to build on our earlier efforts to control cost 

and to extract as much value as possible from the dollars the taxpayers provide us. None of these initiatives in any edition of BBP is more important 

than continuing to build the human capital that is responsible for the successful delivery of every product or service the DoD acquires. 

I asked a number of senior people to provide articles for this edition of 

Defense AT&L magazine, but for my submission I wanted to highlight the 

contributions that our very talented and dedicated PMs, together with 

their staffs and supporting organizations, are providing to the department 

and the nation. Well done. 
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Improving Acquisition From

Within—Suggestions From Our PEOs 

Reprinted from Defense AT&L: July-August 2016 

This year I asked all of our Program Executive Officers (PEOs) to provide 

short assessments and recommendations to me directly. The result, as it 

was for the Program Manager Assessments I’ve received for the last 2 years, 

has been a treasure trove of observations and recommendations covering 

a wide range of topics. I thought it would be useful and insightful for the 

entire workforce to see some of these professional, and very frank, comments. I’ve removed most inputs that were about specific programs and 

edited lightly to make some of the inputs less Service specific. Arranged 

alphabetically by topic, and presented without comment, here is a sampling 

of the topics on our senior line managers’ minds as they confront the many 

challenges we face. 

Acquisition Education: Cybersecurity requirements continue to grow 

impacting virtually everything we do in acquisition from daily workplace 

activities, to Enterprise Resource Planning (ERP) system development, to 

weapon system development. Additionally, the Department of Defense 

(DoD) is required to certify audit readiness in Fiscal Year (FY) 2017. Audit 

readiness affects every career field in acquisition, not just financial management professionals. Ensure that the Defense Acquisition University 

curriculum is updated to reflect audit readiness and cybersecurity considerations and requirements for all of the career fields. 

Also, an executive level Acquisition seminar for our senior General/Flag 

Officers, especially those assigned in the Pentagon, would advance acquisition reform. We consistently find ourselves answering questions to our 

Service Chiefs and members of Congress that are far outside of acquisition 

responsibilities. This is a team sport, and DoD would be better served if all 

of our most senior leaders had a basic understanding of the Defense Acquisition process and their respective roles in it. 

Business Cases and AoAs (Analysis of Alternatives): Why would we do 

both? There is too much complexity and lack of clarity between the Deputy 

Chief Management Officer and the role of the Office of Acquisition, Technology, and Logistics. 

Clinger-Cohen Act (CCA) Compliance: CCA mandates the completion 

and approval of numerous other programmatic documents as supporting 
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Getting Defense Acquisition Right

documentation before a program’s CCA can be certified. The Army Chief 

Information Officer (CIO)/G6 estimates the staffing and approval for a program CCA compliance determination to take up to 120 days to complete. 

Two supporting documents required for submission for a CCA compliance 

determination are (1) Test and Evaluation Master Plan (TEMP) and (2) 

Acquisition Program Baseline (APB). Because of the potential lead time 

required to support a CCA determination (120 days), we recommend that 

draft versions of the TEMP and APB be authorized for submission for CCA 

compliance purposes. We also recommend that significant programmatic 

changes identified during documentation staffing that would alter the CCA 

compliance determination be presented during an abbreviated and accelerated update to allow programs to simultaneously staff critical documents 

without delaying program schedules. 

Configuration Steering Boards (CSBs) and Testing: CSBs have been especially helpful in adjusting requirements (both to provide a forum for 

the deliberate addition of some requirements as well as removing some requirements where they don’t make sense). This process should be extended 

to include using the CSB process to adjust test plans and requirements as 

well rather than allowing independent members of the test community 

virtually unlimited authority to commit programs to cost and schedule 

of tests that the operational leaders of the Service do not believe are warranted. Similarly, it would provide a forum for those same uniformed leaders to insist on testing that might otherwise be overlooked. 

COTS and NDI Acquisition: Financial Management Regulation must be 

clarified to provide consistent guidance on the use of procurement funds 

in lieu of research, development, test and evaluation (RDT&E) funds to test 

Commercial Off the Shelf (COTS) and NonDevelopmental Items (NDI). 

This has tremendous impacts across my portfolio, which is heavily reliant on COTS/NDI and could mitigate additional funding stability risks 

if properly clarified where both the budget analysts and the lawyers agree 

on the flexibility to use either procurement or RDT&E to test COTS/NDI. 

Cyber Security Testing: Cyber testing and the ability to achieve a “Survivable” rating in an official operational test environment continues to be 

nearly impossible for a Program of Record (POR) to achieve. Test criteria 

are not well defined and, even if requirements are met, the standards and 

scope is “independently” determined by the OTA or DOT&E for success. 

The threat portrayal often exceeds the capabilities of a Blue Force Team 

(i.e., nation-state threat going against a brigade-level formation), focuses 

more on “insider” threat of unreasonable proportions, and minimizes the 

importance of “defense in depth” approach. Recommend better definition 

for standard cyber rules of engagement at operational test, the allowance 
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for external cyber protection teams, and that test reports focus on the program under test (not the overall “network”). 

Fiscal Law Constraints: It is likely pie in the sky, but to operate with a single color of money would greatly improve our efficiency and effectiveness. 

We spend far too much time trying to discern the gray areas that exist between the appropriations. Functioning with Operation and Maintenance 

dollars during periods of continuing resolutions and severe cash distribution challenges, makes continuity of support a challenge and results in 

all sorts of bizarre contract actions. If we operated primarily in an Other 

Procurement world with narrow definition on true RDT&E (introduction 

of truly new functional envelopes), we would be much more efficient and 

effective stewards. 

Funding Concerns (10 USC Section 2282): I continue to bring this up to 

anyone who will listen to me. This pseudo-Foreign Military Sales (FMS) 

funding is an excellent tool in that it allows us to deliver capability and build 

Combat Command (COCOM) military partnerships, particularly in countries that can’t afford to invest in our weapon systems. That said, the funding 

is restrictive in that we need to figure out what we’re going to buy, put together an acquisition strategy, and get it on contract in the year appropriated 

(which drives some bad acquisition behaviors). The biggest challenge is that 

we can only use Section 2282 funding to sustain the system for 2 years. After 

that, the receiving country must create/fund an FMS case or the COCOM 

must provide funding. Bottom line is that there is a high risk that these great 

capabilities will be left to rot and quickly become useless. 

Funding Stability and Flexibility: For the last several years, we have started each fiscal year under Continuing Resolution Authority (CRA) for 3 to 4 

months before the budget is enacted and funding begins to flow. The CRA 

creates instability in the year of execution because we can’t have any new 

start programs and the amount of funding available under CRA typically 

is some percentage of our prior year funding. This instability is exacerbated 

by the fact that our funding execution is measured against the Office of the 

Secretary of Defense (OSD) obligation and expenditure goals that do not 

take into consideration the delay in receipt of funding caused by operating 

under a CRA. As a result of missing OSD execution goals, funding often is 

rephased in the outyears, which perpetuates the situation as the cycle has 

consistently repeated itself and is likely to do so in the future. It would be 

helpful if the OSD Comptroller could adjust the OSD obligation and expenditure goals to “start the 12-month clock” when the Defense budget is 

actually passed and not on Oct. 1, as they do now. 

Hiring Authority: The agility of a PEO to support its portfolio with appropriate personnel is not adequate with the formal billeting and staffing 
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process and needs to move to a management to budget construct that allows the hiring of additional government personnel. 

Human Capital: As the military service begins to reduce force structure, 

similar reductions are taking place across the civilian workforce. Additionally, there is pressure from Congress to reduce the number of support 

contractors across DoD. My workforce is comprised of military members 

(4 percent), core DoD civilians (15 percent), matrixed DoD civilians— 

combining the traditional and product organization structure—(46 percent) and support contractors (35 percent). With all of these components 

being driven to reduce numbers and no relief from the mission requirements and expectations, my PEO organization will be challenged severely, 

even after realizing process efficiencies, to effectively perform the mission 

unless some portion of the workforce can be stabilized. 

Innovation: In intelligence, surveillance and reconnaissance and in working with Special Operations Forces, we are working hard at giving people 

the tools to bring out their innovative side and give them the confidence 

to be creative. It is probably the most enjoyable part of my job. I have numerous examples of recent initiatives, but will mention just two of them. 

First, the Rapid Development and Integration Facility (RDIF) continues 

to grow as a place where government program managers (PMs) and engineers (sometimes in partnership with small business) are rapidly modifying everything from gunships to B2s to helicopters. They are taking back 

the technical base line, learning how to innovate and growing confidence 

in our government teams. Second, is the Revolutionary Acquisition Techniques Procedures and Collaboration (RATPAC) forum run jointly between the Air Force and Special Operations Command. Twice a year we 

select about 50 junior acquisition professionals to attend an intense week 

of engagement with our most innovative acquisition, warfighter and congressional thinkers. They leave RATPAC fired up to be acquisition combat 

enablers, and it is really special to see. 

Obsolescence: We face an ever-growing challenge dealing with obsolete 

parts when we build on a COTS-based infrastructure. Components over 

the life cycle of our programs become obsolete when supply chain providers move on to next efforts or divest in the business area. We have seen 

cases where we are replacing obsolete components on a system prior to 

fielding the initial capability. Many vendors are updating their products at 

an increasing rate and do not maintain or support older versions of their 

equipment. This is true for both software and hardware. Programs need 

to ensure they adequately budget for these activities and have the correct 

personnel to address these issues throughout the life cycle of programs. We 

also need to engage with vendors early to ensure we have long term sus­
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tainment strategies that may include extended lifetime buys for key components early in a program to ensure long-term supportability as well, and 

address the ability to upgrade at the component level to meet any potential obsolescence issues. Help is needed in supporting continuous low-level 

modification lines to deal with obsolescence issues. 

Protests: I recommend that there be a penalty for protesting to discourage 

weak protests. Example: paying the DoD’s legal costs, or paying some penalty for the program disruption. 

Quality and Clarity of High Level Taskers: I would like to address the 

quality of taskers or assignments received at my level. Often a broad-based 

tasker is issued and, as it flows down the chain of command, it is interpreted in various ways by a number of different people to the point where 

nobody really understands what information is required. These taskers 

should be clear and concise from the beginning and follow established 

staffing chains to ensure that we are not wasting precious resources (time, 

money and people) providing data and information that does not properly 

respond to the issue. 

Quick Reaction Capabilities: This year alone, I had 42 Quick Reaction Capabilities (QRCs) that I managed and reviewed as separate programs and 

resolved that 5 be closed, had 10 pending closure once 100 percent accountability of assets is resolved, 7 transitions to existing Programs of Records 

(PORs), and 20 that will continue to be managed as stand alone QRCs. 

Note that no QRC comes with organic personnel resources and must be 

managed with allocated POR resources and the heavy use of matrix and 

contractor support. This is not a sustainable model. The military Service is 

working the requirements process that supports these transitions. However, the alignment with the Program Objectives Memorandum (POM) process inherently results in a 2-year gap that we have only been able to solve 

because of the availability of supplemental appropriations. If supplemental 

dollars did not exist, we would have been unable to transition and/or retain 

QRC capabilities to the degree we have successfully done to date. The delay 

in obtaining updated requirements documents hinders the ability to compete in the POM process and exacerbates the gap. A second issue with QRC 

transitions is balancing the adequacy of testing to support POR transition 

and milestone decisions. In many cases, these capabilities have been operated effectively for thousands of hours in combat—meeting requirements 

as specified for military utility, which ought to be the goal of an Operational Test event. Testing a QRC now for integration into a POR, should 

only verify any changes caused by modifying/integrating on platforms or 

needed changes to address usability/human factors of the system when we 

transition from contractor to green suit sustainment/operations. In many 
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Getting Defense Acquisition Right

cases, we are spending extensive resources (time, money, test ranges, personnel expertise) to retest basic sensor performance on capabilities which 

have been operating in combat for more than 10 years as a QRC. The Service Test and Evaluation Organization, the OSD Offices of Developmental 

Test and Evaluation and of Operational Test and Evaluation need to adjust 

to a more continuous evaluation process and away from the big bang, allinclusive testing. Finally, overall, the DoD Instruction (DoDI) 5000 series 

guidance does not address the process of the transition of QRCs to PORs. 

For example, personnel Concept Plans to support program office manning 

take forever, material release tailoring is all but nonexistent to deal with 

COTS, and timely requirements documentation and integration of funding into the appropriate Program Evaluation Groups/base are challenging 

tasks. The aforementioned conditions cause PMs to focus on near-term resourcing and not effective/efficient program management. Help is needed 

from an institutional perspective to take lessons learned and update policies and provide tailoring procedures for improved transitions. 

Reprogramming Authority: Another way to provide additional flexibility would be to allow greater reprogramming thresholds (this requires approval from Congress). Higher Below Threshold Reprogramming limits go 

hand in hand with giving PEOs/PMs greater authority to move cost savings 

realized from successful Better Buying Power (BBP) initiatives within our 

funding lines. This would also act as a strong incentive for the Defense Acquisition Workforce to inculcate BBP principles into our programs. 

Requirements Process: I suggest that both the operational and acquisition communities focus serious attention at the most senior levels on implementing a simplified requirements process which better facilitates the 

rapid technology/threat cycles within the cyber domain. 

Risk Management Framework (RMF): The construct has added time to 

the process with, in my opinion, no added benefit to date. This process 

needs quick efficiency reviews and updating. Help is needed in making the 

RMF more efficient and shorter. 

The new RMF process (which replaced the DoD Information Assurance 

Certification and Accreditation Process), providing for certification and 

accreditation of weapon systems, has been too unwieldy for the speed and 

agility needed in approving cybersystem solutions. Specifically, we have 

identified the following issues with the RMF process as applied to cyber 

weapon systems: 

•	 RMF levies heavy requirements for monitoring, software updates and

policy controls that are less bound by operational concerns than previous systems.
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•	 RMF causes a large resource burden of time and manpower. With the

volume of work entailed in RMF, it is difficult to make consistent progress or to develop reliable schedules to inform our operational user.

Additionally, the unplanned burden on program offices to apply RMF

is taking resources from fixing user issues and addressing modernization needs.

•	 There was little structure put into phasing the RMF requirement into

weapon systems. The full requirement was mandated with less than 2

years to prepare, with limited waiver opportunities provided.

•	 While new systems in development can accommodate RMF during

the design process, legacy systems were not designed with RMF security controls in place, so there are significant programmatic and operational impacts to meeting the RMF controls. Thus, applying RMF

to currently fielded operational systems puts undue burden on the operational user.

•	 Control of and accountability for system cybersecurity is spread over

numerous organizations and is poorly integrated, resulting in diminished accountability and unity of command and control for cybersecurity. These overlapping roles create ambiguity regarding whether the

commander or the authorizing official can make the final decisions regarding risk to a mission.

•	 The coordination process for RMF approval packages continues to

evolve. Changes in expectation, standards and formats are not communicated well, and this often creates much rework, further delaying

approval and impacting program cost and schedule.

•	 The vast majority of our systems currently are accredited under the old 

structure and the RMF process does not allow previous accreditations

to be easily absorbed into the new structure.

•	 There has been a shift in focus from simply managing risk to now ensuring all facets of system vulnerabilities are addressed. While this will improve cybersecurity, there is simply not enough manpower to adequately 

perform all of the required processes, specifically within the Approving

Official and the Security Compliance Assessor communities. 

•	 Approving Officials have not been issuing Plans of Actions and Milestones during this transition process, which has led to an expiration of

Authority To Operate during the lengthy process.

In considering improvement opportunities since RMF has been in use 

and lessons learned have become available, I suggest that the application 

of RMF to currently fielded cyber weapon systems be reexamined and 
60 

Getting Defense Acquisition Right

tailored to reduce heavy RMF resource demands and impact to the operational user. In addition, as stated earlier, it is imperative that the acquisition 

and lifecycle management tools and processes for both new and fielded cyber weapons systems be streamlined to maximize speed and agility within 

reasonable levels cybersecurity risk. 

Sustainment in DoDI 5000.02: I see a difference between a system in the 

sustainment phase and a sustainment program. Because DoDI 5000.2 is silent on sustainment programs, we sometimes treat sustainment programs 

the same as efforts to modernize a program in the sustainment phase, in 

terms of systems engineering, milestones and documentation. Modernizing a program in the sustainment phase usually fits pretty clearly into one 

of the “Defense Acquisition Program Models.” But a sustainment program 

such as a Service Life Extension Program, Diminishing Manufacturing 

Sources Program or a Contractor Logistics Sustainment Program doesn’t 

fit well within those models. Yet there are some nuances, best practices and 

common tailoring that could apply to these types of programs. I thought 

the “model” concept was a great addition to the DoDI 5000 series, so I 

think adding a model for sustainment type programs would be helpful. I 

have also recommended this at the military Service level to address in our 

documents. I see a lot of teams struggle in this area. 

Tailoring: However, although you and other senior leaders continue to 

reinforce the importance of tailoring the acquisition process to the specific and unique characteristics of the product being acquired, the rules 

and policy are frequently interpreted as inflexible and prescriptive. As additional acquisition reform provisions are considered, we should look for 

ways to better institutionalize the expectation for tailoring, particularly as 

it applies to the acquisition of nondevelopmental or minimally modified 

COTS systems. 

Workforce Development Ideas 

Acquisition “Whiteboard” Sessions: I found that often when I received 

milestone packages through the staffing process, the acquisition strategies 

weren’t tailored to the most effective approach to develop or acquire the 

system. In order to prevent frustration of the workforce and get the top 

level concepts right from the beginning, I began hosting “Whiteboard” 

sessions to ensure everyone had a common understanding of the strategy. I run these much like the military Service runs After Action Reviews 

by serving as a facilitator—asking shaping level questions of the program 

stakeholders (from the PM, legal, contracting, etc.) and allowing them to 

shape the strategy through their answers. The level of innovation and quality of the milestone packages has dramatically improved. I’ve received very 
61 

Chapter Two: Building Professionalism 

in the Acquisition Workforce

 

positive feedback on the learning value of these sessions and encouraged 

my subordinates to replicate the process at lower levels. 

Acquisition Categories II and III Configuration Steering Boards (CSBs): 

Much of the equipment we acquire is commercial or commercially based. 

On several occasions, we received approved requirements documents that 

specified requirements substantially outside commercially available features. Our engineers conduct industry Requests for Information, coordinate with commercial testing facilities, and employ analytical tools to 

identify requirements that are driving cost and risk. We then organize a 

CSB with the appropriate one-star level operational community proponent, along with virtual representation from the Service staff to review the 

data analysis. In each case, we’ve been able to temper the requirements to 

only the critical capabilities, thereby reducing programs’ costs and technical risks while allowing them to move forward without risking lost funding 

or schedule delays. 

Junior Employee Shadowing Program: Each PM within the PEO nominates high potential GS12/13 employees to shadow me for 2 weeks. These 

employees can attend all meetings that the PEO participates in and get a 

good sense of how to think critically about the unique facets of each program and how these considerations shape acquisition strategy, contract 

type, contract incentives, and source selection approaches. To date, I have 

had 24 shadow participants, and I have already seen evidence of grassroots 

movement inside their home organizations in taking more innovative approaches to acquisition strategies. 

Topical Town Hall Meetings: I have held town hall meetings quarterly, 

and I always highlight a number of innovative accomplishments in acquisition from several of our individual PMs. As an overarching theme, I’ve 

suggested that our acquisition professionals should treat every decision 

they make as if it was their own money. I’ve continued to encourage them 

to challenge requirements and approaches that don’t make sense based on 

their personal experiences both in acquisition and in their daily lives. 

Conclusion 

As with the Program Manager Assessments, I have responded to each of 

the PEOs individually. In addition, I have asked some of the writers to work 

on follow-up actions to explore solutions to the problems they raised, or to 

implement their specific suggestions. My last article and email to the workforce talked about how real acquisition reform has to come from within 

and it has to take the form of continuous improvement on many fronts. 

This is one more example of what that looks like in practice. 
62 

Getting Defense Acquisition Right

What Really Matters 


In Defense Acquisition
 

Reprinted from Defense AT&L: January-February 2014 

My first inclination for this issue’s article was to discuss the newly released 

DoDI [Department of Defense Instruction] 5000.02. We recently implemented this new acquisition policy document as interim guidance. I provided a cover letter explaining why I had done a new version and outlined 

some of the features of this edition. I do recommend that you look at both 

the cover letter and the new document, but on reflection I decided to write 

about something else for this issue. An enormous amount of time and energy goes into designing our processes and implementing them, but at the 

end of the day it isn’t those processes or policy documents like 5000.02 

that really drive our results. What really matters in defense acquisition is 

our people and their professionalism and leadership—so I thought I would 

start the new year by writing about that. 

This past year we’ve gone through a lot, and all of our acquisition professionals have been asked to put up with more than any workforce should 

have to endure. We’ve had continuing budget turmoil and uncertainty, 

furloughs, continuing resolutions, late-breaking sequestration, and most 

recently a government shutdown. We’re also living under pay freezes and 

the prospect of further budget reductions and staff reductions. I want to 

thank the whole workforce for the way you have all coped with these challenges. While other senior leaders and I have been asking you to improve 

our productivity and achieve ever greater results for our warfighters and 

the taxpayer, you’ve also had to work in very challenging circumstances. 

You’ve come through, and it has inspired me and your other senior leaders 

to see the way you’ve dealt with all these challenges in stride. Thank you. 

Thank you personally, but also on behalf of the Secretary and all the senior 

leaders in the Department. Thank you also for our soldiers, sailors, airmen 

and marines who benefit from your great work as they put themselves at 

risk for our country. 

Recently, I joined Dr. Carter in one of his last official acts as Deputy Secretary in presenting the Packard Awards to this year’s recipients. As I write 

this, I’m looking forward to going out to the Defense Acquisition University to present the USD(AT&L) [Under Secretary of Defense] awards for 

professionalism and developing the workforce to some of our outstanding performers. I’m sorry that we can’t recognize more of our exceptional 
63 

Chapter Two: Building Professionalism 

in the Acquisition Workforce

performers—there are so many of you, and you all deserve to be recognized 

for what you do. During the last few weeks, I also have had occasion to note 

the departure of some of our most capable people who are retiring or will 

soon retire from government service. We lose a lot of terrific people every 

year of course, and these individuals are just examples of the many fine 

professionals working in defense acquisition, technology and logistics. I 

decided that for this article I would note the contributions of some of these 

people with whom over the last few years I’ve had the chance to work. They 

are just examples, but they are especially powerful examples of what one 

can accomplish during a career in defense acquisition. 

I’ll start with Charlie Williams, the recently retired Director of the Defense 

Contract Management Agency (DCMA). Charlie led DCMA for the past 

several years. He started federal service in 1982 in Air Logistics Command 

in a Mid-Level Management Training Program. Charlie then rose through 

a series of contracting, program analysis and contract management positions with the Air Force both in the field and at Air Force Headquarters. 

He became Air Force Deputy Assistant Secretary for Contracting before 

taking the reins at DCMA. At DCMA, Charlie led the rebuilding of the organization after severe reductions in the 1990s. He kept his team together 

during the Base Realignment and Closure move from D.C. to Richmond, 

and he led the effort to ensure that our contracts in support of operations 

in Afghanistan and Iraq were executed properly. 

Next I’ll mention Maj Gen Tim Crosby, the soon-to-retire Army Program 

Executive Officer (PEO) for Aviation. Tim has led Army aviation programs 

since 2008. He was commissioned after graduating from the Citadel and 

started out as a field artillery officer. He moved quickly into aviation as a 

pilot before following his interest in research and development and flight 

testing. In acquisition, he worked in logistics, training and simulation, and 

test and evaluation before becoming a Product Manager, first for the CH47 F and later Program Manager for the Army’s Armed Scout. His long 

tenure at PEO Aviation is marked by strong leadership in support of our 

deployed forces and in building the capability of the Afghan Air Force. Tim 

embraced the Better Buying Power principles and was implementing them 

well before Dr. Carter and I gave them a name. 

Rear Admiral Jim Murdoch retired recently after serving as the Navy’s 

first PEO for Littoral Combat Ships (LCS). Jim entered the Navy with an 

ROTC commission after graduating from Rensselaer Polytechnic Institute 

in mechanical engineering. He moved between surface combatant assignments and acquisition positions. His acquisition assignments included program management for surface weapons and launchers and responsibility 

for integrated warfare systems as well as program manager for the Littoral 
64 

Getting Defense Acquisition Right

Combat Ships. In 2011, Jim was handpicked by Sean Stackley to lead the 

new Program Executive Office for LCS sea-frames and mission modules. 

He stabilized and fully integrated one of the Navy’s most complex acquisition endeavors. 

Finally, Scott Correll, our retiring Air Force PEO for Space Launch, also 

started his career as an intern. From the Pacer Intern Contracting Program 

at Robbins Air Force Base, where he began as a cost analyst and contract 

negotiator on the F-4 and F-15, Scott rose through the contracting, supply chain management and program management fields. Scott’s diverse 

positions include leadership positions at Military Sealift Command and 

TRANSCOM. I was able to take Scott in to meet Secretary Hagel recently 

so the Secretary could thank him personally for saving the Department 

billions of dollars in space launch costs—quite an achievement for our taxpayers and warfighters. 

The people I mention above have accomplished a great deal for their country 

during their careers. They’ve also had the opportunity to do exciting and 

fulfilling work. People who achieve this sort of success over their careers are 

what give us the best equipped military in the world. All of these people have 

a lot to be proud of. All of you have a lot to be proud of. I’m looking forward 

to 2014 with the hope that things will improve—and there are some signs 

that they will. But mostly I’m just looking forward to another year of working 

with this terrific team. Thank you again for all that you do. 
65 

Chapter Three 

Managing Technical 


Complexity
 

“I don’t mind a reasonable amount of trouble.” 

—Dashiell Hammett 

Right after he became Secretary of Defense, Leon Panetta asked me a simple question. He asked me why we couldn’t build other defense products 

as quickly as we had acquired Mine Resistant Ambush Protection vehicles 

or MRAPs, the armored trucks we bought on a very aggressive schedule in 

the tens of thousands to protect our troops in Iraq and Afghanistan from 

Improvised Explosive Devices. My answer was one word, “complexity.” 

MRAPs basically are trucks assembled from pre-existing automotive components (transmissions, engines, drive trains, etc.) with a lot of armor and 

hull shapes designed to deflect blast and to protect the occupants. MRAPs 

provide effective protection and they have saved countless lives, but they 

were designed to deal with an improvised threat used in a counterinsurgency or counterterrorism campaign, not for high-end peer competitors. 

They are not representative of the weapons we usually acquire. This chapter 

takes up the problem of managing complexity, specifically the technical 

complexity that characterizes many of the products that the DoD acquires. 

Most of our weapons systems are designed to give us a competitive advantage over the most capable systems any potential adversary has or will 

have in the foreseeable future. Some of our potential adversaries, China 

and Russia, are aggressively acquiring systems that are being designed 

specifically to defeat the most advanced U.S. systems. In pursuit of the 

dominant capability our warfighters expect and deserve, and that our 

nation needs, we often embed new cutting-edge advanced technology 

into our systems. For most weapons systems, complex and specialized 

software, often with millions of lines of code, is essential to achieving 

the required functionality. Our weapons also need to be cyber secure, 

highly reliable, and maintainable on any battlefield, sustainable at reasonable cost, and effective in a full range of climates and operational 
66 

Getting Defense Acquisition Right

environments. All of this adds complexity, cost and risk to new designs. 

Our acquisition professionals’ most challenging task is to manage that 

complexity and that risk effectively. 

The first article in this section discusses “The Optimal Program Structure.” This was one of the first articles I wrote for the workforce and it was 

intended to make a critical point: Our programs should be structured 

around the product that we are acquiring and the circumstances associated with that product. There is no one optimal program structure, so 

the title is a little misleading, but for every product there is an optimal 

structure for that product. I always start all discussions about program 

decisions by reviewing the design of the product the DoD is acquiring. 

Once the product and a few other driving factors like operational urgency are understood, we can then turn to the subject of how the program 

to design and produce that product should be structured. Building that 

structure is called “tailoring” and it is the antithesis of the idea that all 

product development programs should be structured in the same way or 

have identical content. 

The range of products that the DoD acquires is vast, and the idea that 

a “one size fits all” approach should be mandated or expected is simply wrong. When I rewrote DoDI 5000.02, our fundamental acquisition 

policy document, I included multiple possible starting point models for 

program structures, and I inserted the word “tailoring” dozens of times 

in the text just to make this point. Because of the complexity we deal 

with, the second release of Better Buying Power focused on the need for 

critical thinking over a checklist or cookbook approach to acquisition 

planning and management. This article also makes the point that risk 

and mitigating actions taken to reduce risk, are fundamental drivers on 

program structure. 

Risk means uncertainty, and the real prospect of things not going as we 

would desire. Risk is an integral part of new product development. Designing a new weapon system is a creative process. It is building something 

that has never been built before, and it is achieving levels of capability never reached before—by as wide a margin as possible. Our political system 

seems to demand perfection in program execution so that there is never a 

cost overrun or a schedule slip and all requirements are met. This is simply 

unrealistic if the United States intends to remain the dominant military 

power on the planet. We do know how to remove the risk from our programs: All it takes is to buy existing systems from other nations. There are 

times when that is a reasonable approach, but not for the systems we need 

so that our warfighters can dominate future battlefields against our most 

capable potential adversaries. 
67 

Chapter Three: Managing Technical Complexity

While risk is inherent in the creation of new weapons systems, it must still 

be managed. Managing risk is not a passive activity. A PEO once sent me an 

e-mail indicating that he was waiting to see what happened with regard to 

some known risks on one of his programs. For background, the DoD uses 

a somewhat formal standard process to identify specific risks, to categorize them, and to track program events and risk mitigation plans that are 

designed to reduce the risk over time. The DoD is good (maybe too good) 

at creating standard processes, and our framework for addressing risk is 

fine as far as it goes, but having a tracking system in place and waiting to 

see what happens isn’t what we should expect from our Program Managers 

and their staffs. I sent the following reply to the PEO: 

From: Kendall, Frank III HON OSD OUSD ATL (US)
 

Sent: Wednesday, April 13, 2016 3:38 PM
 

To:
 

Subject: RE: 2016 Program Executive Officer (PEO) Assessment 


Thanks, Generally I agree with your assessment. I’ve gotten to know 

many elements of your portfolio pretty well. 

One comment just so you are aware of what is becoming a pet peeve 

of mine. There are a couple of formulations of this that I’ve seen fairly 

often over the last few years. When a program goes in the ditch, what I 

hear from the PM or PEO is “schedule is being adjusted to reduce risk” 

or “because risks that were accepted were realized the program is being 

restructured.” 

Frankly I find this a little irritating. It seems like an attempt to say that 

we all agreed to roll the dice, and gee look what happened, guess we’ll 

have to make some adjustments. I feel that this is basically a way to 

duck responsibility. The fact is that a program plan which was submitted for approval and justified as being executable wasn’t executed. End 

of story. The reasons can be anything from poor planning to poor performance, to acts of God, but the formulation that “risk was realized” 

strikes me as a way to “spin” failure as something else. Of course there 

are some things we can’t control, but our job is to manage risk, to take 

action to mitigate it, and to adjust immediately when we see problems 

emerging. We are not, or should not be, spectators to our programs 

waiting to see what happens. I wrote a whole article about this. Our job 
68 

Getting Defense Acquisition Right

is to be on top of events and steer them to get where we need to go as 

efficiently as possible. Program management is not a spectator sport. 

Frank 

Frank Kendall 

USD(AT&L) 

RM 3E1010 Pentagon 

703 697 7021 

* * * * 

Risk management is addressed in the second article in this chapter. It 

amplifies the point I made in the e-mail above and discusses some of the 

proactive steps a Program Manager can take, ahead of time, to reduce the 

potential consequences of a risk. 

One of our tools for addressing and understanding risk is something called 

a “Technology Readiness Level,” or TRL. TRLs provide a shorthand numerical scale to assess a technology’s maturity. The next article in this 

chapter is titled (with a nod to the TV program “Star Trek”), “The Trouble 

with TRLs.” I have a strong dislike for TRLs, or perhaps more accurately 

I have no respect for them. TRLs originated with NASA and were introduced to the DoD about two decades ago. They do provide a useful shorthand or benchmark for the state of maturity of a technology—as examples, 

is it theoretical or has it been tested in a laboratory, or in an operational 

setting, or is it in a fielded system? As such they are useful benchmarks to 

begin a discussion of the risk associated with a technology. 

What has happened over time, however, is that TRL ratings alone have 

been viewed as dispositive and used as a substitute for that deeper discussion. The problem with a TRL rating is that it conveys no real information 

about the degree of difficulty associated with completing maturation and 

putting the technology into a design for production. Understanding that 

degree of difficulty tells us how much risk remains to be addressed before 

we can presume the technology is ready to be used in a product. As Bill 

LaPlante, former Air Force Assistant Secretary for Acquisition, once told 

me, “TRLs are what we tell nontechnical management to make them feel 

good. Engineers know enough to ask about the actual work that remains 

to be done.” This in a nutshell is the reason that, as part of Better Buying Power 3.0, I have encouraged the military Services to place technically 

qualified people in charge of development programs. It’s hard to manage 

something you don’t understand, and development of new defense systems 

is the management of engineering and technical risk. 
69 

Chapter Three: Managing Technical Complexity

The next article in this chapter, written for a developmental test professional association publication, discusses the role of test and evaluation, 

particularly developmental test and evaluation, in a defense acquisition 

program. During the last several years, the DoD has rebuilt its developmental test organization within the Office of the Secretary of Defense. We 

have also worked hard to more effectively integrate all testing, both developmental and operational, to achieve maximum efficiency for programs as 

a whole. Developmental test spans all the testing activities from program 

inception up until fielding. The separately conducted Operational Test 

events support final independent determinations about whether a program 

is effective, suitable, and survivable or not prior to proceeding to full rate 

production. Developmental testing provides the information that guides 

program decisions, determines if risks are being addressed successfully, 

confirms performance or identifies problems that must be corrected. Within a program, the developmental test events must be fully integrated into 

the program plan and structured to support the Program Manager and 

Chief Engineer as they address the complexity and risk associated with the 

program. Developmental testers are and should be an integral part of the 

Program Manager’s program team. 

The final article in this chapter discusses a sometime neglected area, but a 

crucial one—manufacturing. It makes the point that we cannot neglect manufacturing technology as a critical enabler in fielding advanced technology 

weapon systems. Recognizing the importance of manufacturing technology, 

the Obama administration undertook a major initiative to open approximately 15 national Manufacturing Innovation Institutes (MIIs). The DoD 

was the government’s leader in establishing the vast majority of the several 

MIIs. My office led this effort, and a number of others, to further the state of 

the art and to improve our manufacturing capability and capacity. 

Throughout the Obama administration, we tracked the manufacturing industrial base, particularly as it was impacted by budget cuts. In some instances, we stepped in to preserve or create a needed capability. The ability 

to produce a design, and to do it economically, is a critical consideration 

in program management and new product development. Years ago when 

I was working on my MBA, I was exposed to a case study in which the 

brilliant artist who was designing beautiful and novel consumer products 

failed to understand the limitations that existing manufacturing processes 

imposed on his ideas. We made exactly the same mistake with the disastrous A-12 combat reconnaissance aircraft program in the 1980s and ’90s. 

If there is one “takeaway” from this section, it should be that, in the creation 

of a complex weapon system, perfection should not be expected; setbacks 

and unforeseen problems will always be the norm—if we are to remain the 
70 

Getting Defense Acquisition Right

world’s dominant military power. Managing any complex weapons system 

development includes trade-offs between cost, schedule, and performance. 

Sometimes urgent need overcomes all other considerations, as it did with 

the acquisition of MRAPs, but more often the customer, our military operator, wants to acquire a system that meets the Service’s full set of needs, or, 

in DoD parlance, its requirements. Those requirements bring complexity 

also, but as discussed in another chapter, they are often demanded by the 

operational user, who understandably desires a high quality product that 

can be kept in the inventory for 30 or 40 years. It’s useful in that regard to 

contrast the MRAP program with another Army protected wheeled vehicle 

program, the Joint Lightweight Tactical Vehicle or JLTV. 

The original MRAP vehicles were built for use in Iraq’s relatively flat terrain. They were large vehicles with simple suspension systems. A few years 

later, it became clear that these vehicles were not suited for use in Afghanistan’s rougher and more constrained terrain. A separate program—the 

MRAP-All Terrain Vehicle (MRAP-ATV or MATV)—was initiated, and 

several thousand smaller vehicles, with more dynamic suspensions and 

other features, were acquired. As ground operations wound down, the 

DoD eliminated from its inventory the vast majority of the roughly 30,000 

MRAPs of all types. However, the DoD is acquiring a large number of new 

design JLTV vehicles that have come through the more standard acquisition process. JLTVs were designed from the start to meet the full range 

of Army and Marine Corps requirements, including the ability to operate 

with high reliability in a wide variety of terrain and climates. 

Which approach to acquisition is the best? The answer is “it depends.” 

When lives were at stake and time was of the essence, it was right to initiate a rapid acquisition program focused only on critical needs that used 

only off-the-shelf components. Without this pressing need, the Army and 

Marine Corps are now acquiring a much more capable and versatile vehicle 

in JLTV that will remain in our inventory for decades. Both approaches, 

and many others, have a place in our suite of acquisition program options. 
71 

Chapter Three: Managing Technical Complexity

The Optimal Program Structure 

Reprinted from Defense AT&L: July-August 2012 

Not too long ago, I was asked during a Q&A session with one of the courses 

at the Defense Acquisition University what I thought was the optimal program structure. The question itself suggests a misunderstanding of how 

programs should be structured, and more importantly, it may be an example of a type of behavior that I’ve seen too much of in the past 2 years 

since I came back to government service. 

The answer to the question is either: (A) There is none, or (B) There are an 

infinite number. There is no one best way to structure a program. Every 

program has its own best structure, and that structure is dependent on all 

the many variables that contribute to program success or failure. To paraphrase and invert Tolstoy, happy programs are each happy in their own 

way, and unhappy programs tend to be unhappy in the same ways. 

As I went around the country a year ago to discuss the Better Buying Power 

initiatives with the workforce, one thing I tried to emphasize repeatedly 

was that the BBP policies were not set in stone. All were subject to waiver. 

The first responsibility of the key leaders in the acquisition workforce is to 

think. One of the many reasons that our key leaders have to be true professionals who are fully prepared to do their jobs by virtue of education, 

training, and experience is that creative, informed thought is necessary to 

optimize the structure of a program. The behavior I’m afraid I’ve seen too 

much of is the tendency to default to a “school solution” standard program 

structure. I’ve seen programs twisted into knots just to include all the milestones in the standard program template. I’m guessing that there are two 

reasons our leaders would do this: first, because they don’t know any better, 

and second, because they believe it’s the only way to get their program approved and through the “system.” Neither of these leads to good outcomes, 

and neither is what I expect from our acquisition professionals. 

So how does one determine how to best structure a program? Whether you 

are a PM, or a chief engineer, or a contracting officer, or a life cycle support 

manager, you have to start in the same place. You begin with a deep understanding of the nature of the product you intend to acquire. The form of the 

program has to follow the function the program will perform: developing 

and acquiring a specific product. The nature of the product should be the 

most significant determiner of program structure. How mature is the technology that will be included in the product? What will have to be done to 

mature that technology, and how much risk is involved? In addition to the 
72 

Getting Defense Acquisition Right

technology that is included, how complicated will the design be? Is it like other designs that we have experience with, or is it novel? How difficult are the 

integration aspects of building the product? Is the manufacturing technology also mature, or will work have to be done to advance it prior to production? These questions on a large scale will begin the process of determining 

if a technology development phase is needed prior to the start of engineering 

and manufacturing development. They will also affect the duration of these 

phases, if used, and the number of test articles and types of testing that will 

have to be performed to verify the performance of the design. 

Beyond a deep understanding of the product itself and the risk inherent 

in developing and producing it, one must consider a range of other factors 

that will influence program structure. How urgently is the product needed? 

How prepared is industry to design and produce the product? How much 

uncertainty is there about the proper balance of cost and capability? What 

are the customer’s priorities for performance? What resource constraints 

will affect program risk (not just financial resources, but also availability 

of competitors, time, and expertise in and out of government)? Is cost or 

schedule most important and what are the best ways to control them on 

this program? What is the right balance of risk and incentives to provide to 

the contractors to get the results the government wants? 

We are not in an easy business. This is in fact rocket science in many cases. 

As I look at programs coming through the acquisition process, my fundamental concern is that each program be structured in a way that optimizes that program’s chances of success. There is no one solution. What I’m 

looking for fundamentally is the evidence that the program’s leaders have 

thought carefully about all of the factors that I’ve mentioned—and many 

others. I look for that evidence in the nature of the product the program 

is acquiring and in the structure the program’s leaders have chosen to use. 

The thinking (and the supporting data) that went into determining that 

specific and often unique structure is what I expect to see in an acquisition 

strategy, and it is what I expect our leaders to be able to explain when they 

present their program plans. 
73 

Chapter Three: Managing Technical Complexity

Risk and Risk Mitigation—


Don’t Be a Spectator
 

Reprinted from Defense AT&L: January-February 2015 

As I have watched programs come through for Milestone Decisions and 

other reviews, I have gained the impression that our processes for risk management may have focused too much on the process and not enough on the 

substance of identifying and controlling risk. I think I may be seeing risk 

identification—categorization in the “risk matrix” showing likelihood and 

consequence and with risk burn-down schedules tied to program events. 

From my perspective, this by itself isn’t risk management; it is risk watching. 

We need to do what we can to manage and control risk, not just observe it. 

All programs, but particularly all development programs, involve risk. There 

is risk in doing anything for the first time, and all new product developments 

involve doing something for the first time. The Department of Defense (DoD) 

has a good tool that lays out in detail the process of identifying, evaluating, 

categorizing and planning for risk in programs. Recently updated to version 

7.0 by our Chief Systems Engineer, Dr. Steve Welby, it is called the Department of Defense Risk Management Guide for Defense Acquisition Programs 

and is available online at https://acc.dau.mil/rm-guidebook. I don’t want to 

duplicate that material here, but I would like to make some comments on 

the substance of risk identification and risk mitigation and how it drives—or 

should drive—program structure and content. 

I think of every development program primarily as a problem of risk management. Each program has what I call a risk profile that changes over time. 

Think of the risk profile as a graph of the amount of uncertainty about a 

program’s outcomes. As we progress through the phases of a program— 

defining requirements, conducting trade studies, defining concepts and 

preliminary designs, completing detailed designs, building prototypes 

and conducting tests—what we really are doing is removing uncertainty 

from the program. That uncertainty encompasses the performance of the 

product, its cost and how much time is needed to develop and produce the 

product. We can be surprised at any point in this process. Some surprises 

can be handled in stride, and some may lead to major setbacks and a restructuring or even cancellation of the program. It is our job to anticipate 

those surprises, assess their likelihood and their impacts and, most of all, 

do something either to prevent them or, if they do occur, to limit their impacts. All this effort is risk management. 
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Getting Defense Acquisition Right

As managers, we can take a number of proactive measures to mitigate risk. 

These measures all tend to have one thing in common: They are not free. In 

our resource-constrained world, we can’t do everything possible to mitigate risk. The things we can do cover a wide spectrum: We can carry competitors through risk reduction or even development for production, we 

can pursue multiple technical approaches to the same goal, we can provide 

alternative lower-performance solutions that also carry lower risks, we can 

stretch schedule by slowing or delaying some program activities until risk 

is reduced and we can provide strong incentives to industry to achieve our 

most difficult program challenges. 

Our task as managers involves optimization—what are the highest-payoff 

risk-mitigation investments we can make with the resources available? I 

expect our managers to demonstrate that they have analyzed this problem 

and made good judgments about how best to use the resources they have 

to mitigate the program’s risk. This activity starts when the program plan 

is just beginning. 

The most important decisions to control risk are made in the earliest stages 

of program planning. Very early in our planning, we determine the basic 

program structure, whether we will have a dedicated risk reduction phase, 

what basic contract types we will use, our criteria for entering design for 

production and for entering production itself, and how much time and 

money we will need to execute the program. Once these decisions are in 

place, the rest is details—important but much less consequential. As I’ve 

written before, these decisions should be guided not by an arbitrary process or best practice but by the nature of the specific product we intend to 

design and build. 

What we call “requirements” determines a great deal—almost everything—about the risks we need to manage. Do the requirements call for a 

product like a Mine-Resistant Ambush Protected vehicle, which is basically 

a heavy truck built from existing off-the-shelf components? Or do they call 

for a Joint Strike Fighter built from all new design subsystems and much 

greater capability and complexity than anything we have ever built? In the 

first case, we probably can go directly into detailed design for production. 

In the second case, we need to spend years maturing the highest risk elements of the design, and it would be wise to build prototypes to reduce integration and performance risk before our performance requirements are 

made final and we start designing for production. 

The contracting approach, fixed price or cost plus, is driven by risk considerations. We need to be careful about the illusion that all risk can be transferred to industry. This is never the case, even in a firm fixed-price contract. 

The risk that the contractor will not deliver the product is always borne by 
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Chapter Three: Managing Technical Complexity

the government. We are the ones who need the product. Industry’s risk is 

always limited to the costs a firm can absorb—a very finite parameter. There 

certainly are cases where we should use fixed-price contracts for product 

development (the Air Force’s new KC-46 refueling and transport tanker is 

an example), but we should limit such contracts to situations where we have 

good reason to believe industry can perform as expected and where the risk 

is not more than the contractor can reasonably bear. 

As a risk-mitigation measure, cost-plus development has a very attractive 

feature from the risk-management perspective—its flexibility. In a fixedprice environment, the government should have defined the deliverables 

clearly and should not make changes or direct the contractor about how to 

do the work. In a fixed-price world, we have chosen to transfer that responsibility to the contractor. In a cost-plus environment, the government can 

be (and should be) involved in cost-effectiveness trades that affect requirements and in decisions about investments in risk-mitigation measures. 

These decisions affect cost and schedule, and in a cost-plus environment 

the government has the flexibility to make those trade-offs without being 

required to renegotiate or modify the contract. 

At certain points in programs, we make decisions to commit both time 

and funding to achieving certain goals. Sometimes the commitments 

include several years of work and require spending billions of dollars. 

These are the milestones and decision points we are all familiar with in 

the acquisition process. These milestones and decision points are critical risk-management events. At each of these points, we need a thorough 

understanding of the risks we face and a clear plan to manage those risks. 

Understanding these risks is rooted in a deep understanding of the nature of the product we are building. 

The nature of the product should determine whether a dedicated technology maturation and risk-reduction phase is needed and what will have to 

be accomplished in that phase. Although they can be useful indicators, 

we can’t rely solely on metrics like Technology Readiness Levels (TRLs) 

to make these decisions for us. A bureaucrat can determine if something 

meets the definition of TRL 6 or not. It takes a competent engineer (in the 

right discipline) to determine if a technology is too immature and risky to 

be incorporated into a design for production. The nature of the product 

also should determine whether system-level prototypes are necessary to 

reduce integration risk prior to making the commitment to design for production. We did not need those prototypes on the new Marine 1 helicopter. 

We did need them on the F-22 and the F-35 fighter aircraft. 

One risk-mitigation rule of thumb for program planning is to do the hard 

things first. In the Comanche helicopter program during the 1990s, the Army 
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Getting Defense Acquisition Right

didn’t have enough funding to mature both the mission equipment package 

and the airframe. The choice was made to build prototype airframes—the 

lower-risk and less ambitious part of the program. This was done (over my 

objections at the time), because it was believed that, without flying prototypes, the program risked cancellation for political reasons. In other words, 

political risk trumped development risk. It didn’t work, and the program 

ultimately was canceled anyway. I do not advocate this approach; there are 

other ways to deal with political risk. In general, we should do the hardest 

things as early as we can in acquisition program planning. Eat your spinach 

first; it makes the rest of the meal taste much better. 

Preferably, we should do the hardest (most risky) things in a Technology 

Maturation Risk Reduction (TMRR) phase where the risk can be reduced 

with a lower financial commitment and with less severe consequences. 

Once Engineering and Manufacturing Development (EMD) begins, a program quickly has a marching army moving forward in a broad synchronized plan of work. When something goes wrong, that marching army 

often will mark time while it waits for the problem to be solved—an expensive proposition. We recently had a problem with the F-35 engine that led 

first to grounding the fleet and then to a restricted flight envelope. All this 

delayed the test program, and the effects rippled through much of the EMD 

effort. It would have been much better to have found this problem before it 

could disrupt the entire flight test program. 

Within either a TMRR or EMD phase, we should structure workflow to 

reduce or realize as early as possible the likelier and more consequential 

risks. Risk should influence program planning details. We can use internal 

“knowledge points” to inform commitments within phases. Our chief developmental tester, Dave Brown, emphasizes “shifting left” in test planning. 

The benefits of this are that technical performance uncertainty is reduced 

as early as possible and that the consequences of realized risks are less severe in terms of lost work, rework or program disruption. 

The major commitment to enter production should be driven primarily 

by achieving confidence in the stability of the product’s design, at least as 

regards any major changes. The key risk to manage here is that of discovering major design changes are required after the production line is up and 

running. This always is a trade-off; time to market does matter and our 

warfighters need the product we are developing. How much overlap is acceptable in development and production (concurrency) is a judgment call, 

but it is driven by an assessment of the risks of a major design problem that 

will require correction—and the consequences of such a discovery. 

We recently had a fatigue failure in an F-35 bulkhead, a major structural 

member. We are in our eighth year of production. Fortunately, in this case, 
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a reasonable cost fix seems viable, and we should be able to modify at modest cost the aircraft we already have built. I say “should be” because the fix 

will take time to verify through testing, and there remains some risk that 

the fix will be ineffective. 

For all our major commitments, but particularly for exiting TMRR and for 

entering production, I demand specific accomplishments as criteria and I 

put them in Acquisition Decision Memoranda. The pressures are very high 

in our system to move forward, to spend the money appropriated and to 

preserve the appearance of progress. I recommend that this practice of setting specific criteria for work package initiation (or other resource, workscope expansion or contractual commitments) be used internally throughout our programs. By setting these criteria objectively and in the absence 

of the pressure of the moment, I believe we can make better decisions about 

program commitments and better control the risks we face. 

Delaying a commitment has impacts now; gambling that things will work 

out has impacts in the future. It often is tempting for managers under cost 

and schedule pressures to accept risk and continue as planned. We are paid 

to get these judgments right—and to have the courage to make the harder 

decision when we believe it is the right decision. 

A source of risk nearly all programs face is uncertainty about external dependencies, often in the form of interfaces with other programs that may 

not themselves be defined or stable. In other cases, a companion program 

(user equipment for the satellite Global Positioning System, for example) 

may be needed to make the system itself viable or useful, but that program 

experiences its own risks that affect schedule and performance. 

We often expect program managers to coordinate with each other, but in 

many cases this isn’t enough. Controlling potential cyber vulnerabilities 

across program interfaces is a good example of an area in which we have 

problems. No affected program manager may be willing to change or have 

any incentive to adjust his or her program to bring it into synchronization 

with the other programs. If there is a negative cost or schedule impact, the 

question always is, “Who will change and who will bear the cost of any 

needed adjustments?” I’m of the view that the DoD could do a better job 

at managing this type of risk. We can do so by establishing an appropriate technical authority with directive control over interfaces and program 

synchronization. 

The sources of some of our greatest risks can go unnoticed and unchallenged. Gary Bliss, director of my Program Assessment and Root Cause 

Analysis Office, has introduced the concept of “framing assumptions” into 

our lexicon. One example of a framing assumption, again on the F-35, was 
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Getting Defense Acquisition Right

that modeling and simulation were so good that actual physical testing 

wasn’t necessary to verify performance prior to the start of production. In 

the case of the Littoral Combat Ship, the assumption was that commercial 

construction standards were adequate to guide the design. Gary’s point, 

and it’s a good one, is that programs often get into trouble when framing 

assumptions prove invalid. However, these assumptions are so ingrained 

and established in our thinking that they are not challenged or fully appreciated as risks until reality rears its ugly head in a very visible way. This type 

of risk can be mitigated by acknowledging that the assumptions exist and 

by providing avenues for us to become aware of sources of evidence that the 

assumptions may not be valid. Our human tendency is to reject evidence 

that doesn’t agree with our preconceptions. 

Gary found several cases where program management failed to recognize 

as early as it should have that core framing assumptions were false. The best 

way to manage this source of uncertainty is to take the time and effort during early program planning to identify a program’s framing assumptions, 

to understand that they are a source of risk and then to actively reexamine 

them for validity as more information becomes available. Again, “knowledge 

points” can be helpful, but we shouldn’t merely be passive about this. In our 

planning, we should create knowledge points as early as possible. If we do so, 

we can respond to any problems that emerge sooner rather than later. 

I’ll conclude by reiterating two key points: Risk management is not a passive 

activity, and proactive risk-management investments are not free. Those 

investments, however, can be the most important resource allocations we 

make in our programs. As managers, we need to attack risk the way we’ve 

been attacking cost. Understand risk thoroughly, and then go after the 

risk items with the highest combined likelihoods and consequences and 

bring them under control. Allocate your scarce resources so you achieve 

the highest possible return for your investments in risk reduction. Do this 

most of all at the very start of program planning. The course set then will 

determine the direction of the balance of the program and whether it succeeds or fails. 
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The Trouble With TRLs 


(With Thanks to Gene Roddenberry 


and David Gerrold)
 

Reprinted from Defense AT&L: September-October 2013 

For a long time now, the Defense Department has been using Technology 

Readiness Levels (TRLs) as a tool to assess the risk of including a new or 

advanced technology in one of our products. There is nothing wrong with 

TRLs except that they are only one input for a risk assessment and provide 

at best a crude indicator of the risk of using a technology in a product. In 

many cases, TRLs tell us virtually nothing about whether we need to take 

additional action to reduce risk and what it will take to reduce a specific 

risk to an acceptable level. Let me give you three real-life examples I’ve seen 

over the last few years: 

Example No. 1: An offeror on a missile program wants to incorporate a 

new infrared imaging array in a missile seeker. The technology will provide a significant performance enhancement. It employs a new material or 

perhaps just a larger array with a proven material. The offeror has produced 

several test arrays and incorporated them in laboratory test articles and 

in a prototype seeker that has been flown in a test article against a representative target. We would seem to have a technology that has reached the 

benchmark TRL 6; it has been tested in a prototype in a relevant end-toend environment. What could be wrong? For a seeker material of this type, 

a critical question is its affordability as well as producibility, which usually 

is a function of the manufacturing processes’ yield percentage. Demonstrating that we can build a few test articles simply does not tell us enough 

about the viability of the technology for large-scale production and therefore about the wisdom of its inclusion in the design for an Engineering and 

Manufacturing Development (EMD) program. 

Example No. 2: To support amphibious operations, a new ramp design is 

needed for a staging vessel that will be used to transfer ground combat vehicles from an amphibious ship to the staging vessel before they are loaded 

onto landing craft and deployed to shore. The intended ramp design is novel, but it does not include any new materials or design features that would 

expand the state of the art in any fundamental way. It is similar to other 

commercial and military designs but will be required to work in higher sea 

states than other similar structures. Subscale models have been built and 
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Getting Defense Acquisition Right

tested in tank tests, and extensive modeling and simulation work has been 

done to verify the design. This “technology” (or design) doesn’t meet the 

TRL 6 benchmark because it has not been tested in a relevant end-to-end 

environment. Should the program office be required to build a full-scale 

test article prior to entering EMD for the staging vessel? There is no way to 

know from the facts I have provided. Resolving this issue requires expert 

judgment about the degree to which the new design departs from proven 

capability, the risk of relying on model testing and simulation, as well as 

about the cost of designing, building and testing a pre-EMD prototype. 

Example No. 3: New mathematical algorithms have been devised to fuse 

data from multiple onboard and offboard Intelligence, Surveillance and 

Reconnaissance (ISR) sources in a networked Command and Control (C2) 

system to be used on a new tactical strike platform. The success of these 

algorithms in substantially reducing the data processing loads on the C2 

system will determine the viability of the design concept because of limitations on available power, cooling and volume on the aircraft. What must 

be accomplished prior to EMD to mitigate the risks of relying on these 

algorithms in the EMD design? If someone told you this technology was 

TRL 6, would that be enough to convince you that the risk was mitigated 

adequately? I hope not. 

One of the hardest and most important aspects of our jobs in developing 

and delivering new capabilities to the warfighter is risk management. A 

problem I’ve seen repeatedly is defaulting to a TRL assessment as a substitute for informed professional risk assessment and well thought-out mitigation plans, including specific knowledge points and decision criteria or 

exit/ entrance criteria for the next phase of development. TRLs do not end 

the conversation about risk. TRLs may start the risk conversation, and they 

may provide a convenient shorthand benchmark, but they do not answer 

the question of whether the total risk of proceeding is acceptable, or define 

what work needs to be done to make the risk acceptable. 

Some time ago I revised the technology assessment process that we require prior to major acquisition decisions, particularly the commitment 

to enter EMD, to place more responsibility on our Program Managers. I 

expect Program Managers to have a thorough and deep understanding of 

the technical risks associated with their programs and of the mitigation 

steps and resources required to reduce that risk. Technical risk considerations drive any number of program decisions, including: (1) the feasibility of requirements, (2) the need to conduct a Technology Demonstration 

(TD) phase, (3) the need for and value of competitive prototypes, (4) the 

specific accomplishments needed before entering EMD or initial production, and (5) the appropriate contract type. All this is Program Manager’s 
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business, requiring judgment that goes well beyond any formulaic assessment of TRLs. 

We also can’t assume that industry will take the needed steps to identify 

and reduce risk. A recent study of TD prototyping programs that I commissioned revealed that industry isn’t necessarily trying to reduce risk as 

its highest priority. When there is a competition, we can expect industry’s 

first priority is to win the competition. We have to make sure that winning 

the competition is synonymous with doing what the government needs 

done to identify risk and drive it down. The study showed that in many, 

in fact the majority, of the cases, industry was achieving an asserted TRL 

6 benchmark for the government but not reducing the risk in the product 

that the vendor intended to build in EMD. This isn’t something we should 

blame industry for; we write the rules and we enforce them. 

We will never have, and should not expect to have, risk-free programs. Our 

warfighters have the best equipment in the world because we take the risks 

inherent in doing things that have never been done before. Our technological superiority rests on this foundation. As acquisition professionals, we 

have to manage risk so we strike the right balance between stretching for 

new and better capabilities and limiting our goals to ones that are attainable and will be reached efficiently at acceptable cost. TRLs are just one of 

the tools we use to accomplish this task, and we should not rely on them for 

more than they can provide or think of them as a substitute for the professional judgments we have to make. 
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Getting Defense Acquisition Right

Perspectives on Developmental 


Test and Evaluation
 

Reprinted from ITEA Journal: March 2013 

During my first tour in the Pentagon in Acquisition, Technology, and Logistics (AT&L) from 1986 to 1994, I was responsible initially for strategic 

defense systems and then for tactical warfare programs. During this time, 

I had the opportunity to work with a Developmental Test and Evaluation 

(DT&E) organization that was very professional and led by an outstanding 

civil servant, Pete Adolph. Somewhere along the way, as priorities and personalities changed in the Office of the Secretary of Defense (OSD), the DT&E 

organization atrophied and all but disappeared. For the last few years, under 

the auspices of the Weapons System Acquisition Reform Act, we have been 

strengthening the DT&E organization within OSD. Ed Greer, who retired 

from public service recently, has rebuilt the DT&E organization to the point 

that it is now performing a role much closer to the one I remember from the 

80s and 90s. As Defense Acquisition Executive, I rely heavily on the DT&E 

office and staff for sound advice on the adequacy of the test programs being 

proposed for major programs and on the implications of developmental test 

results for investment decisions, particularly for entry into low rate production. Developmental testing is a core activity in our acquisition programs, 

however, not just an OSD oversight function. In this article I discuss the role 

DT&E plays in our programs, some important principles I believe should be 

applied to developmental testing, and some common problems I have encountered that relate to the effectiveness of DT&E. 

Role of developmental testing 

The purpose of developmental testing is simple: to provide data to program leadership so that good decisions can be made as early as possible. I 

have a sign outside my office displaying a quote from W. Edwards Deming: 

‘‘In God we trust, all others must bring data.’’ It is our developmental testers who ‘‘bring the data’’ needed to make sound decisions during product 

development. Programs are organized in various ways, but whatever the 

specific organizational model, testing is the source of the crucial information that provides feedback to program management, chief engineers, lead 

system engineers, integrated product teams, and military users on whether 

their designs meet requirements or not. The spectrum of testing types and 

venues that is captured in compliance matrices for system specifications 

runs the gamut of laboratory testing and field testing. All of these sources 
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of information can be valuable, but integrating them into a test program 

and an overall program plan and schedule that meet the needs of developmental testers’ customers requires a high degree of professionalism and a 

deep understanding of how test results can influence design and program 

decisions. In my experience, a well-structured test plan makes all the difference in whether a program is efficiently executed or not. There are two 

layers of DT&E organizational roles and relationships; both are important 

in determining DT&E’s contributions to program success. 

The first layer of DT&E organization exists within the program office. I 

have seen several organizational models for DT&E offices within Department of Defense (DoD) programs, and any of them can work given professional leadership, well-defined lines of authority, and responsibility, and 

commitment to working together as a team. The DT&E office or organization within a program usually reports to the program manager, to the 

chief engineer, or to the lead systems engineer. In some cases, the DT&E 

staff can be matrix staff allocated from centralized functional test organizations, and in other cases, the testing staff can be organic staff members 

of the program office. Whatever the model, the role of the test organization 

is to support the program’s leadership by providing timely, accurate, and 

relevant information to enable efficient and effective program decisions. 

The second layer of DT&E organization exists within the Service or Military Department at a higher level than the program office. Here too there 

are various models, and any of them can be successful. Some Services have 

centralized DT&E support within test organizations that include operational test as well as DT&E. Others have created DT&E organizations at the 

system command level. These organizations tend to be focused on ensuring 

the acquisition and evaluation of the specific data needed to support major 

decisions, such as initiating production or proceeding to Operational Test 

and Evaluation (OT&E). This layer of DT&E organization, with some degree of independence from the standard acquisition chain of command of 

program executive officer and program manager, and even in some cases 

the acquisition executive, can be effective, but it also runs the risk of diluting the authority and accountability of the acquisition chain of command. 

In my own OSD AT&L organization, I consider the DT&E organization, 

which we have rebuilt over the last few years, to have a staff function that 

supports my acquisition decisions and also provides expertise and other 

support to the Services. When there are differences of opinion between the 

OSD DT&E organization and the Service acquisition chain of command, I 

expect them to be brought to my attention for resolution. 

Precepts of effective DT&E 

The following ‘‘precepts’’ are based on my own experience and are gener­
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Getting Defense Acquisition Right

ated largely from a program or engineering management perspective. They 

are in no particular order and are intended merely as food for thought by 

anyone involved in DT&E or any customers or stakeholders in the DT&E 

functional area. 

1. Contribute to program efficiency and effective execution: DT&E is a

support function that enables sound design and program decisions, and 

DT&E leadership should be an integral part of the program planning 

team. DT&E should be part of program planning from the outset. Much of 

product development can be thought of as risk management, where design 

and technical risks are addressed and resolved in an iterative process over 

time. The way DT&E is structured to contribute to this process can make 

all the difference in the efficiency (think waste avoidance) with which a 

product is developed. DT&E leadership should be fully integrated into the 

program management and system engineering functions. Formal ‘‘design 

of experiments’’ techniques are being used widely now to ensure that tests 

are structured to extract meaningful information as efficiently as possible, 

and I applaud this development. Testing isn’t free, however, and we need 

to balance the desire for thorough testing against the resources in time 

and money required to conduct the testing. This can only be accomplished 

through a cooperative effort that fully involves DT&E professionals in the 

program planning process. 

2. Provide relevant information as early as possible: Once a program enters

Engineering and Manufacturing Development (EMD), the commitment to 

design for production unleashes a marching army of interdependent engineers that needs to keep moving in a tight formation through the development process. Any serious design problems that surface late in the development process can stop this marching army in its tracks at great expense 

while the problem is addressed and resolved. The later a problem is identified and the solution determined, the greater the redesign burden and cost. 

To avoid this problem, information on the performance of the design in key 

areas needs to be made available as early as it can be provided and from the 

most reliable source of information available. As good as our design tools 

have become, there is still no substitute for physical testing, particularly 

for our more complex and novel designs. For key program technical risks, 

the early use of prototypes (full or subsystem level) and developmental 

testing during technology demonstration risk reduction activities prior to 

the commitment to EMD can make all the difference between a successful 

EMD and one that experiences massive overruns. Again, DT&E isn’t free, 

and like any program, it needs to be conducted as efficiently as possible, but 

the real benefit of an effectively structured test program is in the cost avoidance it can provide by discovering problems as early as possible. 
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3. Integrate DT&E planning across the product life cycle: DT&E is not just 

about production representative prototype testing in a controlled environment prior to the decision to proceed to OT&E. It encompasses the total 

program of testing, including, for example, hardware in the loop testing in 

system integration laboratories, environmental stress screening at the subsystem level, and software testing in emulators. Whenever data are needed 

to support risk reduction, design validation, and requirements verification, 

there is a role for DT&E in collecting those data and evaluating them on a 

continuum over a program’s life. This spans all phases of a program’s life 

cycle. Increasingly, the Department is keeping systems longer and upgrading them in lieu of pursuing new designs. Effective DT&E is as central to 

these efforts as it is to new product development programs. Well-structured developmental testing should be integral to all phases of a product’s 

life cycle. 

4. Focus on support to internal program decisions and verification of compliance with requirements: DT&E does not exist in a vacuum and is not 

a separate function; its purpose is to support program management and 

technical leadership as it works to develop and field a product that meets 

user requirements. Programs move through a series of development activities that must be successfully completed and verified through testing, often 

as a condition of proceeding to the next phase of the program. Sometimes 

this is the next software build; sometimes it is a higher level of integration, 

and sometimes it is a decision to commit to initial production. DT&E also 

provides an indication of the readiness of a program to proceed to OT&E. 

For any of these decision points, DT&E provides crucial information to 

support the decisions, and the adequacy of that information is central to 

controlling program risk and ensuring contractual compliance. Careful 

planning and well-defined decision criteria are necessary prerequisites, but 

the discipline to enforce those criteria is what often sets successful programs apart. 

5. Use DT&E to improve the efficiency and validity of OT&E: OT&E is conducted with more independence from the program office and the acquisition 

chain of command than DT&E and with less involvement by the contractor supplying the product, but the two test regimes should work together to 

complement each other and avoid unnecessary expenses as much as possible. 

Under Mike Gilmore’s and Ed Greer’s professional leadership, there has been 

a very cooperative relationship between the DT&E and OT&E organizations 

at the Department level. This relationship should continue and be mirrored 

at all levels. While the OT&E community works hard to preserve and ensure 

its independence, I am encouraged by the willingness of that community 

to use the data that DT&E can provide to augment and complement data 

provided by OT&E. We will never have the resources to do as much testing 
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Getting Defense Acquisition Right

as we would like, and achieving statistically meaningful testing is sometimes 

prohibitively expensive. By working together, the DT&E and OT&E communities in OSD and the Services can achieve more valid results, anchor each 

other’s efforts, and do so at less cost. 

How we get into trouble in DT&E— 

Some of the ways at least 

There are times when DT&E doesn’t fulfill its purpose, and a program ends 

up with one type or another of acquisition problem. This can take the form 

of cost overruns and schedule slips, or worse, a product that simply isn’t 

viable, despite having been approved for development and even initial production and after years of effort and expense. The following paragraphs 

provide some of the types of problems I have encountered most frequently 

over the last 40 years. 

In the technology demonstration or risk reduction phase, we permit the 

use of test articles that may not be adequately representative of the actual 

product design. In these cases, the testing that is conducted may be more 

intended to sell a product than to reduce that product’s risks. Motivated 

by a specific example I encountered (a program that was up for a Milestone B decision), I recently asked a former deputy director of the Defense 

Advanced Research Projects Agency (DARPA) to review a number of programs that had been through technology demonstration programs, which 

included DT&E of competitive prototypes. The results were troubling. In 

the majority of the cases, the design that was demonstrated had little or 

no correlation to the design that was going to be developed in EMD. The 

DT&E that was done in the risk reduction phase was not providing data to 

reduce the risk of the target design. It was providing data intended to sell 

the government on the prospective bidder. The lesson I derived from this 

was that the combined government management team (program management, engineering leadership, and developmental testers) was not insisting 

on the relevance and validity of the test program. We can’t blame industry 

for trying to win the EMD contract; we have to blame ourselves for not 

understanding industry’s motivation and insisting on meaningful testing 

that actually addresses the risks in the intended design. 

We use ill-defined user requirements that have not been translated into 

testable technical specifications. As a result, we cannot plan the time and 

resources for appropriate testing in the early stages of a development program, and we cannot hold the contractor responsible for not meeting our 

expectations. The government generally has to define its requirements and 

ensure that they are converted into testable requirements that our contractors can demonstrate they have satisfied in DT&E. If we fail in this respon­
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sibility and provide vaguely defined requirements to industry, we have no 

one but ourselves to blame when our expectations are not met. The largest 

program I ever worked on had extensive user requirements that were never 

properly defined to the prime contractor or converted by that contractor 

or the government into quantifiable and testable technical requirements. 

When the program eventually died of its own weight, years after it had 

started and after billions of dollars of cost, the prime contractor and the 

customer were still debating over how to interpret the requirements and 

how to test for compliance. 

We have to resist the tendency to assume DT&E efficiencies that exceed 

previous experience in response to financial pressure. Most programs 

come under financial pressure at some point; often before the program 

even enters EMD. It is far too easy to assume away the need for an adequate 

number of test articles, or an adequate amount of test time in order to meet 

a budget number or a schedule that has been dictated for some reason. Usually in my experience, program leadership, including the DT&E leadership, 

accepts the constraints that have been provided and gambles on unprecedented test performance and efficiencies. The usual result is increased inefficiency, not the opposite. We don’t want to over schedule or buy unneeded 

test assets, but my experience is that the far more common errors are unwarranted optimism and acceptance of excessive risk rather than excessive 

conservatism or risk aversion. If we have solid reasons to conclude that we 

can improve the efficiency of DT&E (and we should always be looking for 

sources of efficiencies), then we should take those efficiencies into account 

in our planning, but hope is still not a method. 

We sometimes fail to conduct adequate DT&E prior to the decision to 

start production. About a year ago, I called a particular decision to enter production on an aircraft program without flight testing ‘‘acquisition 

malpractice.’’ If a product enters production before the design is stable, the 

resulting waste in cost increases and schedule slips can be dramatic, and 

the program is much more likely to be canceled. I stress solid, well-defined 

DT&E results as an important prerequisite for this decision because the 

pressure to enter production can be overwhelming, and doing so prematurely has major consequences. The Service often feels that it will ‘‘lose the 

money’’ that has been requested a year or more earlier from the Congress 

if the production contract is not awarded. Industry wants to make the sale, 

and the user is anxious to get the new product. The decision to enter production is all but irreversible, and to make this commitment for a new design without the knowledge obtained from adequate DT&E entails high 

risk. That said, there is a balance to be struck. A well-structured DT&E 

program will provide confidence in the stability of the design as early as 

possible. Some degree of concurrency between development (including 
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Getting Defense Acquisition Right

DT&E) and production is usually appropriate. The degree of concurrency 

that is acceptable depends on several factors, but in every case there should 

be a well-defined basis rooted in data provided by DT&E to support this 

critical decision. 

We assume untested design fixes to problems discovered in DT&E will be 

successful, in order to preserve schedule. It is always a judgment call, but in 

general, design changes have to be verified through DT&E just as much as 

the original design needs to be verified. Where I have seen this most often 

is when we are about to initiate or have already initiated low rate production. I recently slowed the rate of production of DoD’s biggest program 

so that we could test design fixes adequately prior to increasing the rate 

of production. I seriously considered stopping production completely, but 

made the judgment call to continue at a low rate while the test program 

verified the design fixes. The cost of stopping and restarting would have 

been very high, so I limited our exposure but didn’t take it to zero. We don’t 

want to be in this position if we can avoid it. 

We sometimes over-focus on DT&E as preparation for OT&E. No one 

wants to fail operational testing, and one of the things we can learn from 

the last stages of DT&E is whether or not a program has a high probability of a successful OT. This doesn’t mean, however, that we should do two 

rounds of OT&E with the first being called DT&E. In general OT&E is not 

intended to be a place to discover unanticipated problems, but we shouldn’t 

be so risk averse that we add what amounts to an extra phase of testing out 

of concern for failing operational test. DT&E should be focused on verifying that the contractor has met the requirements. We should do an effective 

job of linking those requirements and the DT&E that verifies compliance 

to the operational performance that we intend to demonstrate in OT&E. If 

we have done this effectively, the last stage of DT&E shouldn’t have to be a 

full dress rehearsal for OT&E. 

The bottom line 

Developmental testers are critical professionals who make a major contribution to DoD’s programs. They bring a unique body of knowledge to the 

table that is essential to effective program planning and execution. Again, 

it is largely the DT&E community that ‘‘brings [the] data’’ the sign outside 

my door emphasizes. Working with program and engineering leadership 

as key members of the management team, developmental testers provide 

the information that makes program success possible and much more 

probable. 

Editor’s Note: The ITEA Journal article above is reprinted here with the permission of the International Test and Evaluation Association. 
89 

Chapter Three: Managing Technical Complexity

Manufacturing Innovation


and Technological Superiority
 

Reprinted from Defense AT&L: September-October 2016 

At the end of the Cold War, I was serving as the Deputy Director of Defense 

Research and Engineering for Tactical Warfare Programs in the Office of 

the Secretary of Defense (OSD). For years I had studied the intelligence 

reports on Soviet weapon systems and worked on ways the United States 

could achieve or maintain a military advantage over those systems. We 

knew the Russians had some of the best scientists and engineers in the 

world working on their designs. They also had aggressive modernization 

cycles in areas they considered important; their multiple competing design 

bureaus turned out new designs for armored vehicles, missiles and tactical 

aircraft on a predictable schedule at intervals of about 5 years. 

After the Cold War ended, I was anxious to get a close look at the Soviet 

weapons systems we had been working to defeat. I soon had two opportunities to examine the newest Soviet equipment up close. One was a display 

at Andrews Air Force Base in Maryland of all the equipment that we acquired to test once the wall came down and the Russians were desperate 

for any source of cash. The other was at the Farnborough International 

Airshow in England, where the Russians were offering to sell their most 

modern systems to anyone who would buy them. What struck me most 

when I examined the former Soviet equipment was how primitive their 

production technology was compared to U.S. manufacturing technology. 

Those brilliant scientists and engineers had lacked the modern materials 

and manufacturing technology to keep pace with the West. It was clear that 

the performance and reliability of their weapons systems had been severely 

limited by their limitations in areas like precision machining; the ability to 

fabricate multilayer printed circuit boards; and their inability to produce 

integrated circuits. 

I recall in particular the presence of Bakelite, a distinct early plastic thermosetting insulating material, which the United States hadn’t used since 

the 1950s, being everywhere in Soviet 1980s-era aircraft. One of the greatest constraints on the Soviet designers, and on the performance and cost of 

their weapons systems had been manufacturing technology. 

Manufacturing technology doesn’t just affect weapons systems and technological superiority—it also drives national economic performance. The 
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Getting Defense Acquisition Right

first and second industrial revolutions were largely about manufacturing 

technology. The English advantages in mechanized textile manufacturing 

in the early 1800s drove the performance of the British economy, just as 

Carnegie’s steel production in the late 19th century and Ford’s mass production technology early in the 20th drove the growth of the U.S. economy. More recently, ever smaller and more efficient silicon-based integrated 

circuits that can be economically manufactured in massive quantities are 

driving economic growth around the world. 

Recognizing the importance of manufacturing technology to both national security and our economy, the President initiated a program to establish 

Manufacturing Innovation Institutes (MIIs) that would create incubators 

for advanced manufacturing technology in key technological areas. The 

Department of Defense (DoD) has been a national leader in establishing 

these institutions. With the Acting Secretary of Commerce and the National Economic Advisor, I opened the first one—which is dedicated to advancing additive manufacturing (3D printing) technology—in Youngstown, 

Ohio, in 2012. Since then, several more MIIs have been opened, two by 

the Department of Energy and six by the DoD. Several more are on the 

way. The technologies of interest are determined by an expert interagency 

body with industry input. Focus areas include lightweight alloys, digitization of design to manufacturing processes and flexible electronics. All of 

these new institutions depend on collaboration between federal and local 

government, industry and academia. Government funding is combined 

with other sources of funds to get these institutions up and running, but 

they will have to be self-sufficient in a few years when government funding will cease. We don’t know if every MII will flourish; we will let time 

and the requirement to be self-sufficient sort that out. Four years in we do 

know that some of the MIIs we have established are off to a good start, with 

continuing interest from industry, significant advances in manufacturing 

technology and successful products to their credit. 

I would like to recognize some key DoD leaders who have organized and led 

the competitive process to set up the MIIs. First Brett Lambert, then Elana 

Broitman, and now Andre Gudger, as leaders of the DoD’s Manufacturing 

and Industrial Base Policy organization, have been the senior leaders responsible for the DoD’s MIIs. A remarkable team, led by Adele Ratcliff (whose 

article in this edition of Defense AT&L magazine provides much more detail 

on the MIIs), has done the heavy lifting required to make each of the MIIs a 

reality. Each of the Military Departments also has played a strong role—conducting the actual competitions and working with the selected consortium 

to get the MIIs up and running. All of these dedicated professionals deserve 

our appreciation for creating these new national assets. 
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Chapter Three: Managing Technical Complexity

While the MIIs are important, they are only one source of the technologies 

that will make building our future generations of weapons possible and 

affordable. Industry investments are focused on staying competitive in an 

ever-more-competitive world, and help to keep the United States competitive against potential adversaries. 

I have been encouraging defense companies to invest more in research and 

development, and one of the areas of greatest promise is on technologies that 

will lower the production costs and improve the performance of our weapons systems. Industry is responding. One example is the “blueprint for affordability” initiative in which Lockheed Martin and major F-35 suppliers 

have agreed to undertake to reduce F-35 production costs. Through a creative “win-win” agreement, Lockheed Martin and the major suppliers for 

the F-35—Northrop Grumman and BAE—are all making investments that 

will reduce government cost and achieve a higher return for the industry 

participants. Pratt & Whitney has a similar program for the F-135 engine. In 

another example, Boeing has invested significantly in its ground-breaking 

proprietary manufacturing processes that are expected to pay strong dividends in both military and commercial aircraft manufacturing. Industry 

understands that manufacturing technology is the key to competitiveness. 

For more than 50 years, the DoD Manufacturing Technology Program, or 

ManTech, has been used by the DoD to sustain our lead in defense-essential manufacturing capability. The ManTech Program, executed through 

dedicated teams in the Services, agencies, and within the OSD, develops 

technologies and processes that impact all phases of acquisition and reduce 

both acquisition and total ownership costs by developing, maturing, and 

transitioning key manufacturing technologies. ManTech not only provides 

the crucial link between technology invention and development and industrial applications, but also matures and validates emerging manufacturing 

technologies to support feasible implementation in industry and DoD facilities like depots and shipyards. 

Direct investments by the government have often been the genesis of new 

manufacturing technology and a catalyst to spur more investment by industry. When I was vice president of engineering at Raytheon in the 1990s, 

I was able, with the CEO’s strong support, to protect our corporate investment in the technology needed to produce gallium arsenide radio frequency components, a key enabler for a range of important national security 

projects and a major competitive advantage for the company. More recently, government support, together with industry investments, for Gallium 

Nitride components is giving the United States the opportunity to produce 

systems like the Next Generation Jammer, the Advanced Missile Defense 

Radar and others. 
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Getting Defense Acquisition Right

For the acquisition professionals managing our new product development 

programs, manufacturing technology and the risk associated with bringing new technology on line, should be major parts of program planning. 

Our policy encourages the use of Manufacturing Readiness Levels as one 

way to assess the maturity and risk associated with producing specific designs. As I hope you know by now, I’m not a fan of readiness levels—they 

convey no real information about the actual risk or the difficulty of maturing a technology to where it can be used in a product or in manufacturing 

a product—but they do provide a place to start a conversation about that 

risk. Managing the risk associated with manufacturing is as important as 

managing the technological risk associated with performance. This isn’t a 

new problem. When I was working on my MBA in the 1970s, we did a case 

study on how to manage creative designers who failed to appreciate the difficulty associated with actually producing their ingenious designs. While 

a new idea might work in theory, if it can’t be built at an affordable cost it 

doesn’t have much value. As we build risk reduction plans and proactively 

manage the risks associated with new capabilities we cannot afford to neglect the importance of having mature manufacturing processes. 

Given the importance of manufacturing technology, we must protect that 

technology just as we protect the actual designs and performance characteristics of our weapon systems. As I work with our international partners, 

one thing is almost a constant—the desire to acquire advanced manufacturing expertise in order to build more competitive manufacturing capacity and create jobs. Our competitors as well as our friends understand 

the importance of manufacturing technology, and they have no reticence 

about using every available means to acquire that technology—especially 

cyber theft. As we build Program Protection Plans, we must include the 

steps we will take to protect critical manufacturing technology—throughout the supply chain. 

This issue of Defense AT&L magazine is focused on manufacturing, the 

various MIIs and on our programs, such as ManTech, established to invest in critical manufacturing technology. As we plan and execute our research efforts and our development programs, we all should be conscious 

of the importance of advancing the state of the art in manufacturing, of 

managing the risks associated with manufacturing, and of protecting the 

manufacturing technologies that we need to maintain our technological 

superiority over our most capable potential opponents. You can be certain 

that potential adversaries are working very hard to avoid the disadvantage 

embedded in the Soviet weapon systems I was so anxious to investigate at 

the end of the Cold War. 
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Chapter Four 

Working With Industry
 

“We’re all in this game together.” 

—William Styron 

This chapter addresses the most important relationship in defense acquisition—that between the DoD and the for-profit firms that provide almost all 

of the products and services that the DoD acquires. The DoD does business 

with a wide spectrum of companies, but a mere handful are the source of 

most of our major weapons systems. We often refer to these firms and the 

specialized supply chain that contributes parts and subsystems to them, 

as the Defense Industrial Base, or DIB. Most of this chapter addresses that 

specialized industrial base. A much larger group of businesses provides a 

range of products and services that are less unique, specialized, or complex 

than the major systems we acquire. These firms are commercial and often 

have a broad set of customers. Information technology firms are a good 

example. For these companies, the DoD often is a small fraction of their 

business base. Still another type of firm, small business, also is important, 

as small firms provide a disproportionate share of the innovation in our 

economy and are a source of much of our economic growth. 

The first article in this chapter discusses our relationship with industry 

in general and the balance the government has to strike as it simultaneously tries to protect the taxpayer’s investment in defense, treat industry 

fairly, and obtain the high quality products our warfighters need and deserve. The government relationship with industry is defined largely by 

our contracts, but it is also defined by the attitude toward industry that 

we bring to the table, and the expectations we communicate by everything that we do. We need to recognize that profit isn’t optional for industry, and that industry can only absorb so much risk, but we also need 

to protect the taxpayer. The government isn’t a commercial buyer spending its own money. It has a special obligation to be good stewards of the 

funds we spend in defense of the nation. The relationship should be in 

a word “businesslike” and professional—neither too adversarial nor too 

familiar. At the end of the day, we need “win-win” business arrangements 
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Getting Defense Acquisition Right

that motivate industry to work for the government and that provide high 

quality products and services to the DoD. 

Over the years, a number of ideas have been suggested to “solve” the problem of cost overruns in defense weapons programs, usually overruns in the 

product development phase where a new design is created and tested. One 

particular idea resurfaces periodically, probably because its simplicity has 

some seductive appeal. That idea is the notion that fixed-price contracts 

will, first, motivate industry to bid more realistically and, second, provide a 

stronger motivation to control costs. In the extremes, fixed-price contracts 

bind industry to deliver the contracted product without the government 

having to pay for any cost increases, and cost-plus contracts have the opposite structure with the government paying for any cost increase but retaining the freedom to modify the product as the knowledge increases during 

development. We are not limited to these extremes, however. We have a 

broad range of contract structures we can use that balance the risk that has 

to be absorbed between industry and the government. This range is needed 

because of the wide variety of situations the government and industry have 

to work through successfully. For new product development programs involving complex weapons systems, the use of fixed-price contracts should 

be approached with great caution. The second article in this chapter explains what should be considered prior to making that decision, in order to 

treat industry fairly and have a reasonable chance of success. 

Another frequently advocated approach to dealing with industry is to use 

commercial practices instead of the highly regulatory approach used in 

much of defense contracting. Like fixed-price contracts, the use of commercial practices definitely has a place in defense acquisition—but it is also 

not a panacea. The defense market isn’t a commercial market. As a practical 

matter, there is only one customer—and that customer is spending taxpayers’ money, not his own. The products being acquired often are highly specialized and complex, with long and very expensive lead times to production and sales. The DoD also is not a high-volume buyer, and sales to DoD 

are subject to the vagaries of a highly unpredictable political environment. 

Nevertheless, commercial practices often do apply to the products and services the DoD buys, and we need to be alert to these opportunities. The 

next article discusses commercial sources and commercial practices and 

describes some specific instances in which commercial approaches have 

been used successfully in defense acquisition. 

Profit isn’t optional for businesses. One thing I have always enjoyed about 

working in industry is that the metric for success isn’t a mystery; everyone 

in a firm knows what success for the firm looks like. That motivator, profit, 

provides the DoD with its most powerful tool for eliciting better products 
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Chapter Four: Working with Industry

and better performance on contracts with industry. We can be certain that, 

when we offer the possibility of earning a profit, industry will try to obtain that profit. We need to make sure this behavior aligns well with what 

the government is trying to accomplish. The next piece in this chapter discusses the use of profit and financial incentives in the range of activities 

that DoD contracts for from industry, including development, production, 

and logistic services acquisition. The way we structure the potential profit 

drives how industry bids to us and how source selections occur as well as 

how industry performs once a contract is awarded. One source selection 

criteria, Lowest Priced and Technically Acceptable, or LPTA, has been 

criticized by industry as being overused; the situations in which LPTA is 

acceptable or preferred are also addressed in this article. 

How do we get industry to offer the government better than minimally acceptable products? For decades, our source selections for weapons systems 

have been about offering the lowest cost product that met our “threshold” 

requirements. The DoD has provided “objective” levels of performance as 

part of our weapon system requirements definitions, but it hasn’t provided 

any incentive to industry to achieve those higher performance levels. This 

practice has been changed, and with great success. The idea was simple 

enough: Tell industry how much more (in dollars) we are willing to pay 

for better performance, and then give credit for offering a better product 

in source selection. This is done by discounting the bid price by the extra 

value being offered for the purpose of source selection—or, in other words, 

by using a “value adjusted” price for the purpose of source selection. The 

next article in this chapter explains this technique in more detail and provides examples of its use during the last few years. 

Our privately owned, for-profit, defense industrial base is a precious national asset. Many other nations have used public or government-owned 

enterprises to supply military equipment and, for the most part, this has 

not worked well. The profit motive is a strong incentive and it does work. 

The defense industrial base also is very specialized. It produces high-cost, 

complex, specialized, even unique products in low volumes to one principal customer in a highly regulated business environment. 

Over the last several decades, the defense industrial base in the United 

States has slowly responded to market pressures to consolidate into fewer 

and fewer firms. That trend was arrested in the late 1990s when it had clearly gone too far. Competition, at all levels of the supply chain, depends on 

the existence of enough competitors to create a viable market. Recently one 

of the largest defense primes succeeded in acquiring a major new market 

position in a class of defense products it had not previously produced. That 

merger motivated me to release the following statement: 
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Getting Defense Acquisition Right

* * * * 


Statement on Consolidation in the Defense Industry 

DELIVERED BY USD AT&L ON SEPT 30, 2015 

The Department of Defense (DoD) is concerned about the continuing 

march toward greater consolidation in the defense industry at the prime 

contractor level. While the Lockheed Sikorsky transaction does not trigger anti-trust concerns of having a negative impact on competition and 

we understand and agree with the basis upon which the Department of 

Justice (DOJ) decided not to issue a request for additional information 

about the transaction, we believe that these types of acquisitions still 

give rise to significant policy concerns. 

Since 2011, DoD’s policy has been that it would not look favorably on 

mergers of top tier defense firms. Lockheed’s acquisition of Sikorsky 

does not constitute a merger of two top tier defense firms and it does 

not violate that policy. However, this acquisition does result in a further 

reduction in the number of weapon system prime contractors in the 

Defense Industrial Base. Over the past few decades, there has been a 

dramatic reduction in the number of weapon system prime contractors 

producing major defense programs for the DoD. This transaction is the 

most significant change at the weapon system prime level since the large 

scale consolidation that followed the end of the cold war. This acquisition 

moves a high percentage of the market share for an entire line of products – military helicopters – into the largest defense prime contractor, a 

contractor that already holds a dominant position in high performance 

aircraft due to the F-35 winner take all approach adopted over a decade 

ago. Mergers such as this, combined with significant financial resources 

of the largest defense companies, strategically position the acquiring 

companies to dominate large parts of the defense industry. 

With size comes power, and the Department’s experience with large defense contractors is that they are not hesitant to use this power for corporate advantage. The trend toward fewer and larger prime contractors 

has the potential to affect innovation, limit the supply base, pose entry 

barriers to small, medium and large businesses, and ultimately reduce 

competition—resulting in higher prices to be paid by the American taxpayer in order to support our warfighters. 

The reality is that the defense market at the prime contract level has very 

high barriers to entry. Our prime contractors provide very complex and 

specialized products in relatively small numbers to one principal customer. The Department will continue to work closely with the Department 

of Justice and the Federal Trade Commission to ensure that mergers do 
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not reduce competition. In addition, the Department is convinced that 

we should work with the Congress to explore additional legal tools and 

policy to preserve the diversity and spirit of innovation that have been 

central to the health and strength of our unique, strategic defense industrial base, particularly at the prime contractor level. 

If the trend to smaller and smaller numbers of weapon system prime contractors continues, one can foresee a future in which the Department 

has at most two or three very large suppliers for all the major weapons 

systems that we acquire. The Department would not consider this to be a 

positive development and the American public should not either. 

* * * * 

Shortly thereafter, the Department of Justice, after consulting with DoD, 

released the following: 

* * * * 

JOINT STATEMENT OF THE DEPARTMENT OF JUSTICE AND THE FEDERAL TRADE COMMISSION ON PRESERVING COMPETITION IN THE 

DEFENSE INDUSTRY 

The Department of Justice (DOJ) and the Federal Trade Commission 

(FTC) (“the Agencies”) are issuing this joint statement to explain our 

standard of review under the antitrust statutes of proposed transactions within the defense industry. The Agencies are responsible for reviewing mergers in the defense industry under Section 7 of the Clayton 

Act, which prohibits mergers whose effect “may be substantially to 

lessen competition, or to tend to create a monopoly.” The Department 

of Defense (DoD) is responsible for ensuring our nation’s security and 

is in a unique position to assess the impact of potential defense industry consolidation on its ability to fulfill its mission. The Agencies rely on 

DoD’s expertise, often as the only purchaser, to evaluate the potential 

competitive impact of mergers, teaming agreements, and other joint 

business arrangements between firms in the defense industry. When 

assessing proposed consolidation in this sector, the overriding goal of 

the Agencies in enforcing the antitrust laws is to maintain competition 

going forward for the products and services purchased by DoD. Competition ensures that DoD has a variety of sourcing alternatives and the 

most innovative technology to protect American soldiers, sailors, marines, and air crews, all at the lowest cost for the American taxpayer. 

The Agencies analyze mergers pursuant to the analytical framework 

set forth in the DOJ/FTC 2010 Horizontal Merger Guidelines. The unifying theme of the Guidelines is that mergers should not be permitted to create, enhance, or entrench market power or to facilitate its 
98 

Getting Defense Acquisition Right

 

 

 

exercise. A merger can produce these harmful outcomes if it is likely to 

enhance the ability of one or more firms to raise price, lower output, reduce innovation, or otherwise harm customers as a result of diminished 

competitive constraints or incentives. The Guidelines “reflect the congressional intent [in Section 7 of the Clayton Act] that merger enforcement should interdict competitive problems in their incipiency and that 

certainty about the anticompetitive effect is seldom possible and not 

required fora merger to be illegal.” The Guidelines are necessarily general, as they apply to all industries. They areal so sufficiently flexible to 

address DoD concerns that reductions in current or future competitors can adversely affect competition in the defense industry and thus, 

national security. The Agencies also consider particular aspects of the 

defense industry, such as high barriers to entry, the importance of investment in research and development (R&D), and the need for surge 

capacity, a skilled workforce, and robust subcontractor base. In light of 

our substantial experience applying the Guidelines to defense industry mergers and acquisitions, the Agencies are able to focus on issues 

that are central to, and often dispositive in, assessing the competitive 

effects of such mergers. In the defense industry, the Agencies are especially focused on ensuring that defense mergers will not adversely 

affect short- and long-term innovation crucial to our national security 

and that a sufficient number of competitors, including both prime and 

subcontractors, remain to ensure that current, planned, and future procurement competition is robust. Many sectors of the defense industry are already highly concentrated. Others appear to be on a similar 

trajectory. In those markets, the Clayton Act’s incipiency standard is a 

particularly important aspect of the Agencies’ analysis. As part of an 

investigation, the Agencies will consider any procompetitive aspects of 

a proposed transaction, including economies of scale, decreased production costs, and enhanced R&D capabilities. However, if a transaction threatens to harm innovation, reduce the number of competitive 

options needed by DoD, or otherwise lessen competition, and therefore 

has the potential to adversely affect our national security, the Agencies 

will not hesitate to take appropriate enforcement action, including a 

suit to block the transaction. As the 1994 Defense Science Board Task 

Force on Antitrust Aspects of Defense Industry Consolidation report 

states, “the antitrust agencies should continue to determine the ultimate question of whether a merger of defense contractors should be 

challenged on the ground that it violates the antitrust laws.” The Agencies are committed to “giving DoD’s assessment substantial weight in 

areas where DoD has special expertise and information, such as national security issues.” Our mission when reviewing defense industry 

mergers is to ensure that our military continues to receive the most 
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Chapter Four: Working with Industry

effective and innovative products at competitive prices over both the 

short- and long-term, thereby protecting both our troops and our nation’s taxpayers. 

* * * * 

Profit is an important motivator for industry. It does work to obtain better 

products for our warfighters at reasonable cost for our taxpayers, but we 

also will have to remember that business firms will pursue their own and 

their shareholders’ interests, as they should. It’s up to the government to do 

what it can to ensure that the structure of the for-profit industrial base on 

which we depend continues to provide the products we need—at a reasonable cost. 
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Getting Defense Acquisition Right

Our Relationship With Industry 

Reprinted from Defense AT&L: November-December 2013 

As we enter what promises to be a difficult time for both defense acquisition professionals and the industrial base that we rely upon, I thought it 

might be useful to share a few thoughts on our relationship with industry. 

I want to provide some basic guidance for working with our industry partners at any time, but especially when those firms we depend on are experiencing a declining market, as they are now. At any time, we need to be 

aware of industry’s perspective if we are going to work effectively together. 

I left government in 1994 after a career in uniform and as a civil servant. 

One of the reasons I left was that I felt I needed some time in industry to 

round out my background. I spent about 15 years in industry, some of it 

with major defense corporations, some of it as a private consultant working with defense firms of various sizes, and some of it as a partner in a 

small business working with defense companies ranging from start-ups to 

major corporations. Many, probably most, Department of Defense (DoD) 

acquisition people have not worked in industry and have not experienced 

that perspective firsthand. Industry’s perspective is pretty straightforward. 

One of the things I enjoyed about industry was that there was never any 

confusion or disagreement about the metric we used to measure our own 

performance. In short, we were trying to make money: If certain actions 

made us more money, they were considered good; if they made us less money, they were not good. That’s an oversimplification, of course. In actuality, 

the equation for industry is much more complex than this would suggest, 

but in the long run the principle I just articulated governs. If a firm is going 

to stay in business, profit is required. It doesn’t stop there; business leaders also have an obligation to their shareholders to maximize the return 

the company achieves. Our fundamental obligation, on the other hand, is 

to obtain as much value as we can for our warfighters and the American 

taxpayer. Industry’s goal and ours would appear to be in tension, and to a 

degree they are. We are not, however, in a purely adversarial relationship 

with industry. Neither are we in one with completely common interests. 

As we try to maximize the value we receive from industry, we also have an 

obligation to treat industry fairly and reasonably. Here are some thoughts 

about how we should behave in this complex relationship: 

 Give industry the opportunity to make a reasonable profit. How much 

is “reasonable” is subject to some disagreement, but generally it should be 

commensurate with the risks being accepted by industry and with the rate of 
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return a going concern doing similar work would obtain in a free market. As 

I indicated above, profit isn’t optional for a business, and firms won’t support 

the DoD unless they have the opportunity to make an acceptable return. 

 Don’t ask companies to take on more risk than they can absorb. Defense firms generally will respond to any Request for Proposals (RFPs) the 

department puts out for bid that they think they have a shot at winning. 

We in government need to understand the risks associated with the performance we are asking for and structure the business deal so risk is allocated reasonably between the government and industry. This issue tends 

to dominate the decision between a fixed-price and a cost-plus contract 

vehicle. Firms can absorb some risk, but that capacity is limited. Before we 

can set the boundaries and terms of a business deal, we need to understand 

both the magnitude of the risk involved in providing a product or service 

successfully and a company’s capacity to absorb risk. 

 Tie profitability to performance. Profit is not an entitlement; it should

be earned. Our industry partners tend to be smart people. If we give industry a financial incentive to provide the department with better services, or 

a better product, or anything else that we value, and if we structure that 

reward so it is attainable with reasonable effort, then we can expect to see 

the behavior we have motivated. In some business deals, this incentive is 

built in. A fixed-price contract always rewards effective cost control by 

the supplier, but the government may not share in that reward—unless we 

structure the contract so that we do. Incentives can and should cut both 

ways; poor performance should lead to poor returns. In general, I believe 

we can be more creative and more effective at structuring incentives that 

tie profit to performance. By doing so, we can create win-win opportunities 

for industry and government that reward the results that provide value for 

the warfighter and the taxpayer. 

 Don’t ask industry to make investments without the opportunity for a

reasonable return. On occasion, I have seen government managers solicit 

or encourage investments from industry without a realistic prospect of a 

return on that investment. This can take several forms: internal research 

and development spending, participation in government-sponsored but 

unfunded demonstrations, development of proposals or option bids when 

there is no serious prospect of future business, or cost sharing in a technology project that isn’t going to lead anywhere. This kind of behavior often 

occurs as part of an effort to obtain more support for a program that is on 

the margins within a Service’s budget. Putting industry in this position is 

not fair to industry, and it wastes resources that could have been used more 

productively. It also destroys trust between industry and government when 

promised business opportunities do not materialize. 
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 Communicate as fully with industry as the rules allow. For some reason, we seem to have become “gun shy” about talking to industry. That’s 

the wrong approach. The more we communicate our intent and priorities 

to industry, and the more we listen to industry concerns, the better. Up 

until the time a final RFP for a specific effort is released to industry, we 

should not overly restrict our contacts. We do have an obligation to treat all 

firms in the same manner—but that doesn’t mean we can’t have conversations with individual firms, as long as the same opportunity is available to 

others who want to take advantage of it. We can expect that a lot of what 

we hear from companies will be self-serving. At the same time, however, 

companies may have legitimate concerns about how we are doing business 

and superior ideas about how to acquire the product or service we are contemplating. We need to be as open as we can be, and we need to listen. 

 Competition works—use it whenever you can. The wonderful thing

about competition is that it is a self-policing mechanism. Companies are 

motivated to do whatever they can to reduce cost and provide a better 

product or service in order to win business. We also generally can rely on 

industry to protect itself and only sign a business deal that delivers an acceptable profit, or at least does so within the firm’s risk tolerance and consistent with any broader business situation. 

 Treat industry fairly, and keep your word. It is interesting that the commercial world has no requirement for one firm to treat another fairly. (Try 

to imagine a “protest” of a commercial contract award because the buyer’s 

source selection process wasn’t equally fair to all possible bidders.) Because 

we are an arm of the U.S. government and we expend public funds, we 

are held to that standard. It’s also the right thing to do ethically, and it is 

necessary if we want to have constructive relationships with industry. My 

experience is that industry does not entirely trust government people. Our 

source selections are opaque to industry, and no industry capture-team 

leader ever told his boss that he lost because he wrote a bad proposal. If 

we act just once in a way that is not consistent with our values or betrays a 

commitment we have made, then we have sacrificed whatever trust we have 

built. We can spend our credibility only once and then it is gone. 

 Protect the government’s interests and insist on value for the taxpayer’s

money. I put this last for a reason. This is the other side of the coin. Industry can be counted on to try to maximize the metric that I mentioned, 

profitability. Most of the time, but not always, industry will do so within 

the “rules of the game.” The “rules of the game” are defined largely by law 

and by the terms of the contracts we sign. The business deals codified by 

our contracts have to be fair, but they also have to be structured so that 

the government obtains what it wants at a reasonable price and industry is 
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motivated to improve its productivity. Once we have the business deal in 

place, we have to ensure that the product or service we’ve acquired is delivered as agreed. If not, we have a duty to act to protect the warfighter’s and 

the taxpayer’s interests. 

Nothing I’ve written here should be a surprise. These are principles we 

should all be very familiar with already. As we continue, at least for the 

next few months, or maybe years, to experience shrinking budgets and environments that place great stress on both DoD and industry, I believe we 

should make a special effort to keep them in mind. Like everything else we 

do, this requires a deep understanding of the products and services we are 

acquiring, of the business deals we enter and of the industry partners with 

which we do business. 
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Use of Fixed-Price Incentive Firm 

(FPIF) Contracts in Development 

and Production 

Reprinted from Defense AT&L: March-April 2013 

The choice of appropriate contract types is very situationally dependent, 

and a number of factors must be taken into account to determine the best 

contract type to use. From the perspective of both industry and the government, it makes a good deal of difference whether the Defense Department 

asks for Cost type, Fixed-Price Incentive (FPI), or Firm Fixed Price (FFP) 

proposals. In the original Better Buying Power (BBP) initiatives, although 

Dr. Carter and I encouraged greater use of FPI, we also included the caveat 

“where appropriate.” BBP 2.0 modifies this guidance to stress using appropriate contract types while continuing to encourage use of FPI for early 

production. 

I would like to be more explicit about what “appropriate” means and how 

I believe we should analyze a given situation. In particular, I will address 

both Engineering and Manufacturing Development (EMD) and production situations. 

During the early 1990s, I had a lot of painful experience with fixed-price 

development. The A-12 was a notorious case that ended badly. On another 

fixed-price major program in development during the same time frame, 

the program manager was relieved for finding creative but illegal ways to 

provide cash to the prime contractor who lacked the resources to complete 

development. FFP development tends to create situations where neither the 

government nor the contractor has the flexibility needed to make adjustments as they learn more about what is feasible and affordable as well as 

what needs to be done to achieve a design that meets requirements during 

a product’s design and testing phases. Any fixed-price contract is basically 

a government “hands off” contract. In simplistic terms, the government 

sets the requirements and the price and waits for delivery of a specificationcompliant product. While we can get reports and track progress, we have 

very little flexibility to respond to cases where the contract requirements 

may be particularly difficult to achieve. 

Most sophisticated weapons systems development programs deal with 

maturing designs and challenging integration problems. As a result, the 

government often will and should provide technical guidance and make 
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trade-off decisions during development. In EMD, we often do want to work 

closely with the prime contractor to achieve the best outcome for the government. While it certainly is possible to negotiate changes in a fixed-price 

contract environment, the nature of development is such that informed decisions need to be made quickly and in close cooperation with our industry 

partners. The focus in a fixed-price environment is squarely on the financial aspects of the contract structure and not on flexibly balancing financial 

and technical outcomes. 

Risk is inherent in development, particularly for systems that push the state 

of the art. Even with strong risk reduction measures in Technology Demonstration phases and with competitive risk reduction prototypes, there 

still is often a good deal of risk in EMD. By going to EMD contract award 

after Preliminary Design Review, as we routinely do now, we have partially 

reduced the risks—but again, only partially. Our average EMD program 

for a Major Defense Acquisition Program (MDAP) over the last 20 years 

has overrun by a little under 30 percent. Industry can only bear so much 

of that risk, and in a government fixed-price contract, industry cannot 

just stop work and walk away. A commercial firm doing development of a 

product on its own nickel has complete freedom to stop work whenever the 

business case changes. Firms on government contracts do not, at least not 

without some liabilty. 

For good reasons, I am conservative about the use of fixed-price development, but it is appropriate in some cases. Here are the considerations I look 

for before I will approve a fixed-price or FPI EMD program: 

 Firm requirements: Cost vs. performance trades are essentially complete. In essence, we have a very clear understanding of what we want the 

contractor to build, and we are confident that the conditions exist to permit 

the design of an affordable product that the user will be able to afford and is 

committed to acquiring. 

 Low technical risk: Design content is established and the components

are mature technologies. There are no significant unresolved design issues, 

no major integration risk, the external interfaces are well defined, and no 

serious risk exists of unknowns surfacing in developmental testing and 

causing major redesign. 

 Qualified suppliers: Bidders will be firms that have experience with this 

kind of product and can be expected to bid rationally and perform to plan. 

 Financial capacity to absorb overruns: Sometimes overruns will happen despite everyone’s best efforts. We still want responsible contractors 

who have the capacity to continue and deliver the product despite potential 

overruns that may not have been foreseeable. 
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 Motivation to continue: A business case must be provided via a prospective reasonable return from production that will motivate suppliers to 

continue performance in the event of an unanticipated overrun. It is unrealistic to believe contractors will simply accept large losses. They will not. 

As an example, the Air Force Tanker program met all of these criteria. 

Early or low-rate production have similar considerations, but here is where 

greater use of FPI contract vehicles makes the most sense as an alternative 

to cost-plus vehicles. Over the last 20 years, the average overrun for MDAPs 

in early production has been a little less than 10 percent. This is a reasonable risk level to share with industry in an FPI contract arrangement. I 

expect our program managers and contracting officers to have meaningful, 

detailed discussions about the risks in contract performance over target 

cost. Determining a ceiling price is all about the fair recognition of risk 

in contract performance. Unlike an FFP contract, there needs to be a fair 

sharing of the risk—and the rewards—of performance. 

To be comfortable with a fixed-price vehicle for early production, I would 

look for the following: 

•	 Firm requirements (as explained)

•	 Design proven through developmental testing

•	 Established manufacturing processes

•	 Qualified suppliers

•	 Suppliers with the resources to absorb some degree of overrun

•	 Adequate business case for suppliers to continue work if they get in

trouble

It should be noted that some of the items on this list reflect the “responsibility determination” that should be part of every contract we sign. However, 

the decision I am talking about here is not the decision to award a contract 

or accept a proposal for consideration but rather the decision about what 

type of contract to employ. 

The above apply to FPIF procurements for which proposals are solicited 

at or near the end of EMD after we have been through Critical Design Review, built production representative prototypes, and completed some significant fraction of developmental test (DT). This is very different from a 

case in which we are only at Milestone (MS) B when we ask for low-rate 

initial production (LRIP) options. In that case, designs are not usually 

firmly established, production representative prototypes have not been 

built, and DT has not yet been done. So when we ask for FPIF proposals as options at MS B, we have already failed criterion 2 at least. In those 

cases, we ought to have a low risk of completing EMD without major design changes that would affect cost. Again, the Air Force Tanker program 
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serves as an example. Another example where this can be done is a Navy 

auxiliary, where the shipyards have a great deal of experience with similar 

designs and with the design process for that class of ships. 

FPIF LRIP can have a number of advantages, including better insight into 

contractor costs and an opportunity to share in contractor cost reductions. 

While it is attractive to secure FPIF prices at the time we award EMD contracts, as we usually still have competition at that point, we need to balance 

the benefit with the risk. Optimism tends to prevail early in programs, both 

for government and industry, and we need to be realistic about the risks 

that remain before EMD has even begun. It also is an illusion to believe we 

can routinely transfer all the risk in our programs to industry. Industry has 

a finite capacity to absorb that risk and knows how to hire lawyers to help 

it avoid large losses. 

We can and should increase the use of FPIF contracting, but we need to 

approach with some caution FPIF contracting for EMD and for options on 

LRIP lots that are still years away from execution. During the transition to 

production, after successful DT has established that the design is stable and 

that production processes are under control, FPIF becomes a very attractive bridge to an FFP contracting regime. 

Finally, there also may be times during the mature production phase of a 

program when the use of FPI contracts would be preferred. Typically, mature production programs are well established in terms of requirements, 

design content, and production processes at both the prime contractor and 

subcontract level. This environment should provide for accurate pricing, 

and FFP contracts would seemingly be appropriate. However, if we have 

reasons to conclude there may be a poor correlation between negotiated 

and actual outcomes, the use of an FPI contract would be more appropriate. 

In that case, we would share the degree of uncertainty with the contractor. 

There could be several reasons why the correlation between negotiated 

and actual outcomes may be poor—e.g., ineffective estimating techniques, 

unreliable actual cost predictions at either the prime and/or subcontract 

level, incomplete audit findings, or diminishing manufacturing sources for 

some components. In addition, there may be times (e.g., multiyear contracts) where the period of performance is long enough that it places too 

much uncertainty and risk on either party. The key is understanding the 

pricing environment. If we have well-prepared contractor/subcontractor 

proposals, an environment where we have a solid actual cost history, and 

we have done the necessary analysis to ensure we have the price right, the 

use of FFP contracts is fine. If the environment is uncertain, the use of an 

FPI contract may make sense. 
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Again, BBP 2.0 stresses use of the appropriate contract types. Unfortunately, sorting this out is not always easy. It is hoped that this discussion will be 

helpful as we all wrestle with the problem of getting the best answer to the 

question of what type of contract to use in a given situation, whether it is 

an MDAP or an Acquisition Category III product, and at any phase of the 

product life cycle. 
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DoD Use of Commercial 


Acquisition Practices
 

When They Apply and When They Do Not
 

Reprinted from Defense AT&L: September-October 2015 

The Department of Defense (DoD) generally buys major weapon systems 

through the defense acquisition system, a process that is highly tailorable 

but still built around the assumption that the DoD will compensate suppliers for product development, contract through Defense Federal Acquisition Regulations and be heavily involved in all aspects of the product life 

cycle. A number of organizations—including the Defense Business Board, 

some think tanks and some in Congress—have encouraged or recommended greater use of commercial practices. There are indeed times when 

using more commercial practices makes sense, and we should be alert to 

those opportunities—in any aspect of defense procurement. 

There are three aspects of “going commercial” that I would like to address—first, purchases based on the fact that an item is offered as a commercial product; next, the need to access cutting-edge commercial technologies; and, finally, those cases where we can take advantage of private 

investments to develop products we might traditionally have purchased 

through the normal multi-milestone acquisition system. 

Our policies and regulations try to strike the right balance between taking 

the steps needed to protect the taxpayer from overpaying while simultaneously avoiding discouraging commercial firms from doing business with 

DoD by asking for more information than they are willing to provide. For 

purely commercial items widely and competitively sold on the open market, this is easy. For thousands of items, from office furniture to cleaning 

supplies to laptop computers, the DoD pays commercial prices (subject to 

negotiated adjustments for quantity-based discounts, etc.) without inquiring as to the costs to produce the products. Other items are more clearly 

and purely military products, such as a replacement part for a howitzer or 

a low observable fighter component. The gray area between these extremes 

represents a problem in first determining that a product can be considered commercial, and, then, if there is no competition for setting the price 

for that product, obtaining adequate information from the supplier and 

other sources to determine that the price charged is fair and reasonable. 

We are working to expedite these processes, make them more predictable, 
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and provide technical support to the procuring officials who must make 

these difficult determinations. I’m afraid that we will never be perfect at 

this, given the vast number of items the DoD procures and our limited resources, but we must and will improve our performance while preserving 

a reasonable balance. 

It is clear that in many areas of technology the commercial market place 

is moving faster than the normal acquisition timeline for complex weapon 

systems. Examples include information technology, micro-electronics, 

some sensor technologies, some radio frequency devices and some software products. In most cases, these technologies will enter our weapon 

systems through one of our more traditional prime contractors. Our prime 

contractors and even second- and lower-tier suppliers are looking for a 

competitive advantage, and, when commercial technologies can provide 

that advantage, they will embed them in their products. 

Competition among primes can give us access to current commercial technologies early in a program, but we often move to a sole-source situation 

when we down-select for Engineering and Manufacturing Development 

(EMD), reducing the incentives for inserting state-of-the-art commercial 

technologies. We can sustain these incentives by insisting on modular designs and open systems, both emphasized under the Better Buying Power 

initiatives. As part of this process, we also must manage intellectual property so we don’t experience “vendor lock” in which we cannot compete 

upgrades without going through the original contractor. 

Assistant Secretary of the Air Force (Acquisition) Bill LaPlante’s initiative 

to “own the technical baseline” includes the concept of proactive management of configuration control and of interfaces so that the DoD preserves 

the option to introduce technology at rates more consistent with the pace 

of relevant commercial technology improvements. 

The DoD also is taking other steps to improve our access to commercial 

technology. These include opening the Defense Innovation Unit–Experimental (DIU-X), in Silicon Valley, investments through In-Q-Tel and increased emphasis on the productivity of programs like the Small Business 

Innovative Research program. The DoD also is evaluating the congressionally sponsored Rapid Innovation Fund (RIF) and will make a decision this 

year as to whether to include a request for funds for a Reduction in Force 

in the Fiscal Year 2017 President’s Budget. All these steps are designed to 

open the DoD to more timely and broad commercial technology insertion. 

The last of the three “going commercial” topics I would like to cover involves situations in which the DoD substitutes a more commercial acquisition model for the ones depicted and described in DoD Instruction (DoDI) 
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5000.02. In some cases, industry, traditional defense contractors and others 

will invest to bring a product to the DoD market, without DoD shouldering 

the direct cost of product development. The critical motivation for these 

independent businesses decisions is the prospect of reasonable returns on 

the corporate investment. 

Cost Sharing 

Sometimes, especially when there is a mixed DoD and commercial market 

for the product, a cost-sharing arrangement may be appropriate in a public-private “partnership” for development. DoD acquisition professionals 

need to be alert to these opportunities and prepared to analyze them and 

act on them where they benefit the government. When we do this, we may 

need to be innovative and think “outside the box” about business arrangements and contract structures. In these cases, the structure and processes 

in DoDI 5000.02 may be highly tailored or even abandoned. I’ll illustrate 

this concept with a few real-life examples. 

As we moved down the path of DoD-funded research and development 

for tactical radios under the Joint Tactical Radio Systems program, we discovered that in parallel with the DoD-funded programs of record, some 

companies had invested their own money to develop and test products that 

used more advanced technologies than the Programs of Record. These essentially commercial product development efforts offered the prospect of 

cheaper and higher performance systems, without a DoD-funded development program. As a result of this, we changed the acquisition strategy to 

allow open competitions and stressed “best value” source selections so we 

could take advantage of the most cost-effective radios available. 

Our “system” had a little trouble adjusting its planning to this type of acquisition. The Developmental Testing people wanted to perform a standard 

series of developmental tests, even though the development was complete. 

Operational Test people wanted to test each competitor—before source selection. Program oversight people wanted to do Milestone (MS) A and B 

certifications, even though there was no reason to have an MS A or B. 

What we needed, and where we ended up, was a competitive source-selection 

process for production assets that included an assessment of bidder-provided 

test data, laboratory qualification testing, and structured comparative field 

testing to verify the offered products met DoD requirements. There were 

minimum requirements that had to be met; once that was established, a bidder would be in a “best value” evaluation for source selection for production. 

It was a little surprising to me how wedded our workforce, in both the Service and the Office of the Secretary of Defense, was to the standard way of 

doing business—even when it didn’t really apply to the situation. 
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The next example involves space launch. The DoD is working to bring 

competition into this market. That opportunity exists because multiple 

firms have been investing development funds in space launch capabilities for both commercial and DoD customers. We acquire space launch as 

a service; there is no compelling reason for DoD to own launch systems. 

What we need is highly reliable assured access to space for national security payloads, which can be acquired as a service. For some time, we have 

been working to certify a commercial launch company to provide national 

security launches. That milestone recently was achieved for the first “new 

entrant” into national security launches in many years. The DoD did not 

fund the development of the new entrant’s launch system, but it did provide 

support through a Cooperative Research and Development Agreement for 

the certification process. 

More recently, the need to remove our space launch dependency on imported Russian rocket engines has caused the DoD to evaluate options for 

acquiring a new source of reliable competitive launch services. Through 

market research, we know there are options for private investment in new 

launch capabilities but that industry’s willingness to develop the needed 

products may depend on some level of DoD funding. The DoD intends to 

ask for industry bids in a very open-ended framework for whatever financial contribution would be necessary to “close the business case” on the 

guaranteed provision of future space launch services. This novel acquisition approach will work only if the combined commercial, other government customer, and military launch demand function can provide enough 

anticipated launch opportunities to justify industry investment. This effort 

is a work in progress, and we don’t know if it will prove successful. If it 

does succeed, it will provide for the continuing viability of two competitive sources of space launch services—without the need for DoD funding 

and executing a new standard DoD development program for a launch or 

propulsion system. 

Another example from the space area is the Mobile Ground User Equipment (MGUE) for GPS III. These GPS receiver electronics “chips” will be 

ubiquitous in DoD equipment and munitions. The technology also will be 

relevant to commercial GPS receivers that will be embedded in millions of 

commercial devices. Here, also, the DoD has been proceeding with a standard DoD-funded development program with multiple vendors developing 

MGUE risk reduction prototypes leading up to an EMD program phase. 

The combined market for this capability is so great that the competitors 

proceeded with EMD on their own, without waiting for a DoD MS B or 

contract award. They did this so successfully that the EMD phase of the 

program was canceled in favor of a commercial approach that limits the 
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DoD’s activities to compliance testing of the MGUE devices and integration of those devices into pilot platform programs. 

The final example I’ll cite is the Marine Corps decision to defer the program 

to acquire a new design amphibious assault vehicle in favor of a near-term 

option to acquire a modified nondevelopmental item (NDI). The Marine 

Corps concluded, I believe correctly, that the technology was not mature 

enough to support the Corps’ desired performance levels and that a new 

product would be unaffordable. As a result, the Marine Corps opted to first 

evaluate and then pursue a competitively selected near-NDI alternative. 

This is more military than commercial off-the-shelf, but the principle remains the same. This program does include some modest DoD-funded development to, for example, integrate U.S. communications equipment and 

test for compliance with requirements, but it is a highly tailored program 

designed to move to production as quickly as possible and with minimal 

DoD costs. 

The Common Thread 

What all these examples have in common is the DoD’s recognition that an 

alternative path—outside the normal DoDI 5000.02 route—was available 

and made sense from both a business and an operational perspective. Once 

such an opportunity is recognized, a more commercial approach can be 

adopted, but this requires some novel thinking and open-mindedness on 

the part of the DoD acquisition team. We cannot “go commercial” for all of 

our acquisitions or even most of our weapons systems. The normal process 

works best for the standard low-volume, highly specialized, cutting-edge 

and uniquely military products that populate the DoD inventory. The business case simply isn’t there for industry to develop and offer these types of 

products without DoD development funding. In all standard DoD acquisitions, however, we need to proactively look for ways to embed or insert the 

most current commercial technologies. Where commercial approaches are 

justified, we need to spot and capitalize on the opportunity. 
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Tying Profit to Performance—


A Valuable Tool, But Use 


With Good Judgment
 

Reprinted from Defense AT&L: May-June 2015 

One thing I enjoyed about working in industry was that everyone in the 

private sector understood the definition of success: It was profit. If something made a profit for a business, it was good. If something did not make 

a profit for a business, then it was not good. Profit is the fundamental reason that businesses exist: to make money for their owners or shareholders. 

Without profit, businesses die. 

From industry’s point of view, more profit is always better. Not being profitable makes a company unsustainable and will lead to bankruptcy. Declining profits make it harder for businesses to raise capital or to invest for their 

futures. These facts make profit the most powerful tool the Department of 

Defense (DoD) has to obtain better performance from industry. It is important, however, to recognize that this also implies that over-aggressive 

use of this tool can seriously damage the institutions we depend upon for 

products and services. 

Sometimes—through some combination of incompetence, poor management, the realization of risk, or external factors—defense companies will 

lose money and even go out of business. That is the nature of capitalism. We 

do not have an obligation to protect defense companies from themselves, 

but we do have an obligation to treat them fairly and to try to balance our 

use of profit as a motivator for better performance with an understanding 

of the possible implications for those we expect and hope to do business 

with over the long term. 

As we continue to work through a period of uncertain and declining budgets, we need to be especially careful. A recent study by the Institute for 

Defense Analyses shows very clearly that cost increases correlate strongly 

with tight budgets. Historically, programs initiated during tight budget periods had 3 times higher acquisition cost growth for production than those 

started during less constrained resource periods. We’re working now to 

understand what causes this strong correlation, but one likely factor is that 

tight money motivates everyone to take more risk. A shrinking market and 

fewer bidding opportunities put pressure on industry to bid more aggressively. Government budgeters and programmers are motivated to take risk 
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also, or to buy into optimistic assumptions or speculative management fads 

as alternatives to having to kill needed programs. Industry may be incentivized to sign up for a low target—knowing that they might otherwise be 

out of that market permanently—and hoping that budget instability and/ 

or changing requirements will provide a recovery opportunity. We can’t 

entirely prevent industry from making high-risk bids in competition, but 

we should do what we can to ensure realism in our budgets and executable business arrangements that give industry a fair opportunity to make 

a reasonable profit. 

The profit margins that DoD pays vary, but in the aggregate they are fairly 

stable. Large defense companies, in particular, have very little risk. Their 

markets are fairly predictable and stable. The government pays upfront for 

most product research and development costs, and provides excellent cash 

flow through progress payments, minimizing the cost of capital. Most development programs are also cost reimbursable, which significantly limits 

the risk to industry. Substantial barriers for new companies to enter the 

defense market also limit competitive risks. While there usually is competition early in product life cycles, many products end up as sole-source 

awards by the time they enter production. The primary defense market 

customer, DoD, is highly regulated, is not allowed to arbitrarily award contracts, and is subject to independent legal review if a bidder believes it has 

not been treated fairly. At the end of the day, it’s not a bad business to be in, 

and we don’t want to change these fundamental premises of government 

contracting. We do, however, want to get as much for the taxpayer and the 

warfighter as we can with the available resources. That means we must tie 

performance to profitability. 

As we have tried to incentivize and improve industry’s performance under 

the Better Buying Power (BBP) initiatives of the last several years, we have 

consistently followed two principles. First, BBP is not a “war on profit”—we 

are not trying to reduce profit as a way to reduce costs. We want to continue to give our industry suppliers a reasonable return. Second, we will 

use profit to motivate better performance, both as a carrot and a stick. In 

the balance of this article, I want to focus on this second principle. 

How do we use profit effectively to obtain better results for the taxpayer 

and the warfighter? I’m going to address some specific cases I think are important: product development, early production, lowest price technically 

acceptable, commercial and commercial-like items, logistic support, and 

support services. 

First, I would like to address the use of profit as an incentive in general. 

Before we solicit anything from industry, we need to think carefully about 

what the government really needs or desires and how we can effectively tie 
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getting what we need to profit opportunities for industry. In product acquisitions, we need to decide whether higher performance or cost or schedule 

or some combination of these parameters matters to us. Often they are not 

independent, and we have to think about how those interdependencies are 

related to profit-related incentives. In services acquisitions, we often want a 

certain quality of performance; we may or may not be willing to pay more 

for higher quality performance of the service, or we may only be interested 

in controlling cost at a set level of performance. As we emphasized in BBP 

2.0, we have to start by thinking, in this case thinking carefully about what 

matters to us and about the extent to which fee or incentive structures can 

add motivation to behavior that achieves those government objectives and 

that wouldn’t exist without the incentives. 

We can use the full range of contract types to motivate performance. For 

products, we sometimes place the highest value on the schedule, sometimes 

on the cost, and sometimes on increased performance levels. Our contracts 

often inherently include a high degree of profit motivation without any special incentive provisions. For example, a firm-fixed-price contract provides 

a strong financial incentive to control costs. 

However, we also need to think about how incentives that affect profit will 

play out over the life of the contract and the life cycle of the program. It 

is not just the immediate contract that we care about. We need to think 

through profit incentives not only under the expected scenario but under 

any alternative scenarios that may develop, including the realization of 

any foreseeable risks. A cost-plus development contract that has reached 

a point where nothing is left to be gained or lost in fee by completing the 

effort doesn’t include much incentive. 

We also need to think carefully about unintended consequences. Industry 

may look at the situation very differently than we do. We can assume industry will try to maximize its profit—by whatever means we make available. We also can assume industry will examine all the available scenarios—including ones we have not intended. That means we need to anticipate 

industry’s behavior and make sure that we align industry objectives with 

the performance we intend. In general, we also can expect industry to argue for incentives that come sooner in the period of performance and are 

easier to achieve. Usually that is not what we should be rewarding. 

We also must recognize there is no motivational value in incentive fees 

or profits that are impossible to earn—or conversely that are very easy to 

achieve. The bottom line is that this isn’t simple, and, as in much of what we 

do as acquisition professionals, careful thought and sound judgment based 

on experience play major roles. One of the items I am most interested in 

when I read a program’s Acquisition Strategy or a request for proposal is 
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the incentive structure and how it ties profit to performance. I particularly 

look for why the program manager and the contracting officer chose the 

proposed approach. Now I’d like to discuss some specific cases. 

Product development: On our major competitive development contracts, 

industry has been receiving final margins of about 5 percent or 6 percent—about half the levels seen in production. (Note that this isn’t where 

we start out; the reality of the risk in development programs leads to this 

result. Also note that margins on sole-source development contracts are 

significantly higher.) Industry accepts this lower outcome because of two 

things. First, competitive pressures force industry to bid aggressively and 

take risks in the development phases. Second, winning subsequent production contracts, with their higher margins and decades of follow-on work, 

makes it worthwhile to accept lower returns in development. Most often, 

the inherent risk of development makes a cost-plus vehicle appropriate, and 

profit then is tied to the incentive fee structure we provide. If the situation 

still is competitive after award, winning the future engineering and manufacturing development or production contract provides all the motivation 

to perform we are likely to need. However, in a sole-source situation, we 

need to structure profit potential to affect desired outcomes. 

The data from recent sole-source contracts show that formulaic incentive 

structures with share ratios above and below a target price are effective in 

controlling costs on the immediate contract. Often, however, performance 

on the current contract is not what concerns us the most. We may want 

lower cost in follow-on production or sustainment, or we may want higher 

performance in the final product, or some combination of parameters. This 

is where we need to be very thoughtful and creative about how we use profit 

to motivate desired behaviors and outcomes. 

Early production: Usually when we award these contracts, we have a relatively mature design and a specified performance we intend to achieve, so 

cost control tends to dominate our use of the profit incentive. We generally 

use formulaic incentive share ratio structures during this phase. In the first 

iteration of BBP, we encouraged consideration of 120 percent ceilings and 

50-50 share ratios, as a starting point, adjusting these structures to the situation at hand. The key to effective incentive contracting is to motivate the 

contractor to reduce costs as quickly as possible. 

In the past, we have not done as good a job as we should have done in establishing realistic target costs. When we negotiate challenging but achievable target costs, we create an incentive arrangement that allows industry 

to earn a higher share of any underruns in early production. DoD should 

reap the benefits in future lots through lower prices. In addition, industry 

has more at stake here than the government: As we move up or down share 
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Getting Defense Acquisition Right

lines, industry gains or loses what it cares most about—profit—at a much 

higher rate than the DoD gains or loses what it cares about—cost. For this 

reason, we should provide share ratios above and below target prices that 

give industry greater incentives (e.g., more favorable share ratios for industry below target and less favorable ones above target) to control cost. 

Lowest price technically acceptable (LPTA): Industry has expressed concern for some time about the effect of this source-selection criterion on 

selections and profitability. I recently provided some policy guidance on 

this subject (see the March-April 2015 issue of this magazine). DoD’s policy 

is to use LPTA only when there is (1) an objectively measurable standard 

of performance, and (2) there is no desire for any performance above some 

defined level of acceptability in that standard. In all other cases, we should 

use another form of best-value source selection. If LPTA is used properly 

in competitive source selections, it will give us the performance we desire 

and constrain profit levels to those necessary for businesses to be viable. 

That is what competitive markets do. While we aren’t trying to artificially 

force profit down to reduce cost, we also shouldn’t pay higher margins than 

those determined by competitive market forces for this type of work and 

standard of performance. 

Commercial and commercial-like items: This is a particularly difficult 

area in which to achieve the right balance. Our policy is simple: If a supplier sells us a commercial item and the supplier can demonstrate that it sells 

that item in substantial quantities to commercial customers, we will pay 

what other commercial customers pay for similar quantities. When we buy 

truly commercial items, we compare prices, try to get volume discounts, 

and let the market set the price (often using tools like reverse auctions). 

When we buy a commercial item, the reasonableness of the price we pay 

is important to us—not the profit level a commercial company may make 

when selling that item. We must understand that the risk posture of a commercial company selling commercial items in a competitive marketplace is 

dramatically different than that of the traditional defense contractors with 

which we deal. 

When we purchase items that may be sold commercially, or which are close 

in design to items sold commercially (sometimes referred to as “commercial of a type”), but for which there is really no competitive market to establish prices and margins, we have an obligation to ensure that we obtain fair 

and reasonable prices for the taxpayers whose money we spend. Examples 

include aircraft parts that are similar in design, but possibly not identical, 

to the parts used on commercial aircraft. In those cases, we have processes 

in place for our buyers to establish whether the item is commercial, and if 

it is, the fairness and reasonableness of the price. If an item is commercial, 
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we only inquire about costs (and profit margins) when we have exhausted 

the other available means of determining price reasonableness. 

Logistics support: We started emphasizing Performance Based Logistics 

(PBL) in BBP 2.0 as a way to reduce costs and improve outcomes on product 

support contracts. As we went through the difficult fiscal year 2013 sequestration scenario, our use of these types of arrangements actually declined. 

Today I am tracking the use of PBL through quarterly reviews at the Business Senior Integration Group. PBL is an effective tool that ties profit to 

performance in a way that has been demonstrated to be a win-win for DoD 

and industry. PBL is harder to implement and execute than other business 

arrangements, but the payoff is well established by the historical results; 

PBL profit incentives work to enhance performance and reduce cost. 

Support services: In these contracts, we often buy some form of administrative or technical support to carry out routine functions that are not inherently governmental. There may be metrics of performance to which we 

can tie profitability—and, if they are available, we should use them. Often, 

however, services are about the productivity and basic skill sets of individuals working on location alongside DoD military or civilian employees. At one point, we routinely used time-and-materials or firm-fixed-price 

contract vehicles for these types of support services. A preferred approach 

is often the use of cost-plus-fixed-fee arrangements to pay actual costs coupled with DoD contract manager oversight with discretion over the acceptability of assigned contractors. In these cases, quality can be controlled by 

rejecting contractor staff members who are not performing up to contract 

standards. Since profitability will depend on providing acceptable staff to 

bill for, the incentive to do so is high. 

Conclusion 

Industry can be counted upon to try to maximize profitability on behalf 

of its shareholders and/or owners—that’s capitalism. Our job is to protect 

the interests of the taxpayers and the warfighter while treating industry 

fairly and in a manner that won’t drive businesses away from working for 

DoD. To achieve these complex objectives, we should strive to ensure that 

we create business deals that provide industry an opportunity to earn fair 

and reasonable fees/profits, while protecting the government’s interests. 

Industry will respond to profit incentives if they are achievable with realistic effort. We will benefit if profit incentives provide effective motivation to 

industry and are tied to the goals we value. 

There is plenty of room for creativity in this area because our business situations vary widely. It is up to each of us to determine how profit incentives should be structured so that reasonable profit margins can be earned 
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with reasonable performance levels, superior performance results in higher 

margins, and inferior performance has the opposite effect. 
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Getting “Best Value” for the 


Warfighter and the Taxpayer
 

Reprinted from Defense AT&L: March-April 2015 

We use the phrase “best value” fairly often, usually to describe the type of 

source-selection process or evaluation criteria we will use in a competitive 

acquisition. Under the Better Buying Power initiatives, we have emphasized using a more monetized and less subjective definition of best value. 

As a way to spur innovation, we also have emphasized communicating the 

“value function” to the offerors so they can bid more intelligently. 

Some reluctance and understandable concern arose about the unintended 

consequences of trying to define best value in monetary terms. In fact, this 

decision can’t be avoided. I would like to explain why it is unavoidable, provide some examples of using this approach, and discuss how we can avoid 

those unintended consequences some of us worry about. I’ll also touch on 

the proper use of Lowest Price, Technically Acceptable (LPTA)—which is 

a form of monetized best value, but with a very restrictive definition and 

range of applicability. 

A “traditional” best-value source-selection process combines disparate 

metrics in to one overall evaluation. In a recent example that I reviewed, 

four separate and unrelated metrics were proposed for the source selection: risk (high, medium or low), cost ($), performance (a composite scaled 

metric) and degree of small business utilization (with its own scale). Think 

how this would have played out in the source-selection decision making. 

Setting aside the small business metric, assume that there was a slightly 

more expensive and higher-risk but much higher-performing offeror and 

a slightly less expensive and lower-risk but significantly lower-performing 

offeror. The Source Selection Authority would have to decide whether the 

increased price and risk of the higher offeror was worth the difference in 

performance. That acquisition official, not our customer (the warfighter), 

would have needed to make the “best value” determination as a subjective 

judgment by weighing cost against the other two metrics. In effect, that 

individual in the acquisition chain would make the precise cost versus performance and risk judgment we intend when we recommend monetizing 

the value of performance and including it in the evaluated price. 

The likely bias for an acquisition official making the source selection is to 

take the lowest-price offer; it’s much easier to defend than the subjective 
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judgment that the higher-cost offeror was worth the difference in price. Is 

this the best way for us to do “best value” source selections? To the extent we 

can do so, we are better off defining “best value” by a single parameter we 

can readily compare. The easiest way to express that parameter is in dollars— 

using value-based adjusted price for evaluation purposes (e.g., bid price with 

predefined dollarized reductions for performance above threshold). 

I believe there are some very good reasons to take the approach of monetizing performance metrics. First of all, it forces our customers—the operators who set requirements—to consider how much they are willing to pay 

for higher performance. Our normal practice in the requirements process 

is to define two levels of performance—threshold and objective. Unless we 

provide industry an incentive to do otherwise, we can expect it to bid the 

threshold levels of performance and no more. The simple reason is that we 

usually don’t give industry any competitive incentive to offer higher performance. The lower threshold levels of performance almost always are the 

lowest-cost levels of performance. 

Getting the requirements community to consider what it would be willing 

to pay for different levels of performance also has an important side benefit: It forces that user community to recognize that its requirements are not 

free and to engage the acquisition community on prioritizing those requirements. We must work as a team to be effective. Involving our customers in 

decisions about best value before releasing the final Request for Proposals 

(RFPs) builds our mutual understanding of the real-life trade-offs needed 

in almost any product or service acquisition. Monetizing best value to industry also provides benefits that accrue to the government. By not providing industry with a business reason to offer higher performance, we create a 

disincentive for innovation. We want industry to be in a position to make informed judgments about what level of performance to offer. The easiest way 

to accomplish this is to tell industry exactly, in dollars and cents, what higher 

levels of performance are worth to us. Industry then can compare its costs of 

meeting higher performance levels to our willingness to pay and decide what 

performance to offer. 

We also should provide this information as early as possible, so industry has 

time to react to the information, including, when possible, time to develop 

new technologies that are integratable into their offerings. In addition, communicating this information to industry allows uncompetitive firms to avoid 

wasting company funds (allowable Bid and Proposal costs in overhead that 

the government reimburses) on proposals that have no chance of success. We 

have to define best value if we want industry to offer it to us. 

There is a side benefit to monetizing best value criteria in that the objective 

source-selection criterion are harder to contest successfully. I don’t believe 
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we should design our source-selection criteria or acquisition strategies 

around minimizing the likelihood of a protest, whether it is a successful or 

an unsuccessful protest. But I don’t mind having that feature as a byproduct of our approach. Avoiding successful protests is about setting down 

the rules for source selection, following them religiously, documenting the 

decisions we make so we can explain them if challenged, and maintaining the process integrity. All our source selections, of any type, should be 

conducted in this manner. At the end of the day, however, no one should be 

able to argue with the government about the monetary value we place on 

a specific feature or level of performance before we conduct a source selection (as long as we have a reasonable rationale for our choices and aren’t being arbitrary). This judgment also is easier to defend if it is transparent and 

communicated to offerors well before we start the source-selection process. 

About 15 years ago, while in industry, I tried for months to get the Air 

Force to provide some allowance, some competitive credit, for my company’s AIM 9X air-to-air missile’s above-threshold performance. We had 

a novel design with exceptional off bore-sight capability, well above the 

threshold requirement. I didn’t succeed and we lost the competition, but 

the Air Force also lost the opportunity to acquire an innovative design with 

superior performance. I find it hard to believe that performance had no 

value whatsoever to the Air Force. In any event, we received no credit in 

the source selection for offering what we were certain was a better product. 

We have been using the technique of monetizing performance differences 

in source selections under Better Buying Power 2.0 and will continue this 

emphasis under BBP 3.0, but the practice didn’t start with BBP. 

One early use was in the second KC-46 Tanker competition. There was a 

successful protest by the losing offeror in the first competitive best-value 

source selection conducted in 2008. In the second competition in 2009, we 

moved to much more objective source-selection criteria, using evaluated 

price as the primary metric. In addition to folding fuel costs and operational efficiency into the evaluated price, we allowed for consideration of 

a long list of “desired but not required” features, but only if the evaluated 

prices were within 1 percent for the two offerors before we considered these 

features. Essentially, we bound the value of all these objective features as 

being worth no more to us than 1 percent of evaluated price. Notice that 

this had nothing to do with the cost of those features. 

Value or worth to the buyer has nothing to do with cost; it is only about 

what we would be willing to pay for something. The tanker situation is 

analogous to buying a car and deciding what options to include. All those 

options, the “fully loaded” version of the tanker if you will, were only 

worth a 1 percent price differential to us. Having this information allowed 
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industry to be a smarter offeror and propose a product more in line with 

our “value function.” 

More recently I had an experience with the acquisition strategy for a tactical radio program where the program manager intended to use a LPTA 

approach. He was asking for threshold performance and didn’t plan to provide any credit to higher performance in the evaluation criteria. 

I asked him hypothetically if he would want to buy a radio with twice the 

range and twice the message completion rate for 1 percent more. The answer, 

of course, was yes. We changed the evaluation criteria. Sometimes LPTA 

makes sense but it doesn’t make sense if we are willing, as we usually are, 

to pay a little more for a much better product. LPTA may be an easier way 

to do a solicitation and a source selection, but that shouldn’t be our metric. 

The warfighter and the taxpayer deserve better from us. LPTA is appropriate 

when we have well-defined standards of performance and we do not place 

any value on, and are therefore unwilling to pay for, higher performance. 

LPTA is used in many acquisitions for services. As discussed above, it may 

be appropriate—if there is no value to the government in performance beyond well-defined thresholds. 

The arguments against monetizing best value include a concern recently 

expressed by an Army program executive officer: Industry is likely to game 

the system to try to win. He was right, of course. We want “best value.” 

Industry wants to win. Nevertheless, I don’t find this to be a strong argument against monetizing best value. I do find it to be a strong argument for 

getting it right and making sure we align our source-selection criteria with 

what we want (what we value). If we have properly defined what is important to us and what we are willing to pay for that “best value,” industry will 

position itself to meet our best-value proposition. 

There are various possible ways to meet our best-value proposition—and 

from industry’s point of view, that’s not gaming us; that‘s doing what it 

takes to win. Our concern should be with getting the “best value” criteria right. We need to monetize best value in a way that doesn’t permit an 

unintended consequence imposed on us by a crafty proposal team. I have 

worked on a reasonable number of proposals from the industry side and I 

know the concern has some validity. When we set source-selection criteria, 

we need to do our own red-teaming process to ensure we don’t produce 

unintended and negative consequences. Basically, this is just a matter of 

running through the range of possible approaches to bidding to see if we 

have neglected an excursion that has an unintended and negative effect. 

You can count on industry to do the same. 
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I have also heard the concern that industry may inflate its pricing to come 

just under what we are willing to pay, even if the cost is substantially lower. 

In a competitive acquisition, we should be able to count on the fact there 

will be other bidders to prevent this behavior. Offerors have to beat the 

competition, regardless of the government’s willingness to pay. Incidentally knowing our published budget figures also provides industry with a 

strong indication of what we could pay for the product. In any case, we 

must use either competition or, in a sole-source environment, discussions 

about actual costs to ensure we get a reasonable price for the warfighter and 

the taxpayer. Monetizing best value doesn’t change those processes. 

In development contracts, we often are concerned about risk, and it’s fair to 

ask whether it is possible to monetize risk considerations. We can set subjective risk scales for evaluation purposes and do so routinely, using High, 

Medium, and Low—or a more finally grained alternative. Translating these 

comparisons into relative monetary value takes some thought, but it can 

be done. One has to be careful because risk valuations can be very nonlinear. For example, “low-risk” and “medium-risk” offerors might have fairly 

small differences in “value,” but a high-risk offeror could (and probably 

should) have prohibitively high cost adjustments to overcome. We would 

expect both low- and medium-risk offers to be obtainable but with cost 

and schedule impact differences. A high-risk offer has a finite probability 

of being outside the realm of the possible. 

A better way to handle risk factors is to create thresholds or “gates” as opposed to comparative assessments. If an offer has acceptable risk, it is considered responsive and evaluated for cost and performance. If an offer has 

high risk, it is eliminated from the competition. This is one of the many 

areas in which we have to use professional judgment and a real understanding of the actual risks involved in order to make a good decision. 

It is argued that this approach is more difficult and time consuming. A 

former senior official once told me that “convenience” was the biggest determiner of an acquisition strategy. I certainly hope that is not so. We do 

have finite capacity, but we owe our customers our best efforts in every 

acquisition. I am not persuaded that monetizing best value is prohibitively 

difficult. It is a new approach for many in the requirements community, 

and they won’t be comfortable with it until they have more experience. 

My first attempt to use this approach was on the Combat Rescue Helicopter program. It took several attempts to get the user community to stop 

bringing me cost estimates for various levels of performance. Ultimately, 

the users concluded that the cost premium the Air Force was willing to 

pay for objective performance was only about 10 percent. This information 

caused one company to drop out of the competition. I’m not troubled by 
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Getting Defense Acquisition Right

that result. It would have been a waste of time for that company to prepare 

an offer. It does take a little more effort up front to define best value in 

monetary terms. However, the source-selection process is made simpler, 

and, more importantly, we can get better results for our customers. That is 

the metric that should matter most to us. 

As we build our teamwork with both the warfighters who set requirements 

and with industry which tries to win business by meeting those requirements, I believe there will be more acceptance and support for monetizing 

best value. It is in everyone’s interest and well worth the effort. 
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Chapter Five 

Responding to External 


Forces and Events
 

Congressional Direction, Financial Management Policy, Funding Cuts, Changing 

Threats, and Military Customers 

“So we beat on, boats against the current, 

borne back ceaselessly into the past.” 

—F. Scott Fitzgerald, “The Great Gatsby” 

The list of external forces and actors affecting defense acquisitions is long. 

By external, I mean external to the community of defense acquisition practitioners. The list includes the Congress; other executive branch operations, 

such as financial management; potential adversaries; and our customers— 

military operators and their leaders. These and others create constraints 

and an environment that exerts forces to which the defense acquisition enterprise must react. This chapter deals with some of these forces and their 

impacts on defense acquisition. 

The Congress almost continuously makes legislative changes that affect 

defense acquisition, often under the rubric of “acquisition reform.” These 

efforts wax and wane, but they recur with higher intensity every few years, 

often as a result of dissatisfaction with the performance of the “acquisition system.” Some of these efforts have produced very positive results—the 

Weapon Systems Acquisition Reform Act of 2009 or the Improve Act of 

2011 are good examples. Others have had mixed results or worse. 

In my view, the best results are obtained when Congress works closely with 

the DoD and there is an informed discussion of any proposed changes 

before they are implemented. One example of a process that fosters this 

is the initiative of the last few years by the House Armed Services Committee, led by Chairman Mac Thornberry, to file proposed legislation for 

the purpose of obtaining feedback before a final bill is drafted. Another 
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example was the outreach in 2014 by Senators John McCain and Carl Levin 

to obtain acquisition reform suggestions from a wide range of involved and 

concerned individuals. I was one of those individuals. I submitted the recommendations included in the following letter: 
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Getting Defense Acquisition Right
131 

Chapter Five: Responding to External Forces and Events

One of the suggestions in this letter was that the Congress refrain from 

writing additional rules for the DoD and instead work on reducing the 

current number of rules. The fact is that we already have too many rules; 

some of them are too rigid and limit our flexibility, and almost all of them 

require increased bureaucracy for implementation and to ensure compliance. Recently there has been some success in our efforts to work with 

the Congress to reduce bureaucratic requirements, as several of the DoD’s 

legislative change requests have been implemented. Unfortunately, many 
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more new requirements have also been added and the appetite to continue 

the effort to improve acquisition by statute does not seem to be diminishing. On a positive note, the DoD has a congressionally directed team, a 

commission, currently conducting a 2-year review of the publication that 

implements all the congressionally directed federal and defense contracting regulations, a document that spans thousands of pages and which has 

been continuously added to for decades. The intent is to drastically simplify 

the content. It is a noble endeavor and one that I hope will be successful. 

That success, however, will ultimately depend on Congress’ willingness to 

repeal existing legislation. 

Another issue mentioned in my letter to Senators McCain and Levin was 

the problem of the perverse incentives to get our budgets out the door—to 

spend to an arbitrary schedule. The Congress will rescind funds that are 

not obligated in a timely way. This puts pressure on the DoD’s acquisition 

managers to put money on contract in order to avoid loss of the funds. 

Industry is well aware of this constraint, and it can put our managers in a 

difficult negotiating position. We should certainly not ask for money before 

we need it, and we should be managing our cash flow efficiently, but when 

the circumstances call for patience, we should not be punished for failing 

to obligate funds. To address this issue, I worked with the DoD’s financial 

management leader, the Under Secretary of Defense (Comptroller) to issue 

the letter that appears below to provide guidance to the DoD’s Program 

Managers and contracting professionals on how obligation rate requirements and sound business practices would be balanced. This practice has 

been implemented, in part through joint reviews by the Comptroller and 

Acquisition staffs, to good effect and it should continue. 
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Chapter Five: Responding to External Forces and Events
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Getting Defense Acquisition Right
135 

Chapter Five: Responding to External Forces and Events

For the past few years, the DoD—in fact, most of the federal government— 

has been operating under the threat that our annual budgets will be determined by a process called sequestration. Sequestration is an external 

force that is unprecedented and severe in its consequences. This budget 

mechanism was originally implemented in statute as a motivator to a congressional “super-committee” that was tasked to reach a political budget 

compromise. Sequestration was intended to be the unacceptable default 

that would motivate the super-committee to succeed. It failed, and in 2013 
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Getting Defense Acquisition Right

sequestration was implemented, causing the DoD to cut more than $30 billion from its operating budget halfway through the year. As I write in 2017, 

sequestration is still a threat hanging over the DoD. Without statutory relief, it will remain the default budget mechanism through 2021. 

In early 2013, on the eve of the implementation of sequestration, I published the first article in this chapter, laying out some of my plans for acquisition improvement, including the second version of the Better Buying 

Power initiatives. With the general election over, I believed that the next 

few years would be difficult, but I also believed that I would have a few relatively uninterrupted years to provide consistent acquisition policy guidance and management to the DoD. Sequestration was about to make this 

much more difficult. 

The DoD had not anticipated, and did not adequately prepare for sequestration in 2013. In addition to the large reductions we had to absorb, we 

also had the problem that the law provided virtually no flexibility as to 

where the funds would be cut. In addition, the fiscal year was already approximately half completed before sequestration was initiated. Because the 

cuts were widely distributed, the impact was not dramatic or obvious—but 

it was severe. The DoD was forced to furlough most civilian employees to 

make up some of the shortfall in operational funds. The workforce members felt betrayed by a process and a government that had let them down. 

(Later in the year, we also endured a government shutdown as well.) Secretary Panetta and the entire DoD leadership did everything we could to 

mitigate the impact. In July 2013, I issued the following guidance to the 

acquisition workforce: 

* * * * 

From: Kendall III, Frank HON OSD OUSD ATL 

Sent: Tuesday, July 09, 2013 4:54 PM 

Cc: AT&L Personnel 

Subject: Guidance During FY13 Sequestration and Furloughs 

OUSD AT&L OFFICE OF ADMINISTRATION BROADCAST 

AUDIENCE: ALL AT&L PERSONNEL 

DATE: July 9, 2013 

To the Defense Acquisition Workforce, 

As we continue to execute a sequestered FY13 and enter a period of furloughs for most DoD civilian employees, I’d like to give you some basic 

guidance as to how we should do our jobs during this period. 

Firstly and most importantly, we have an obligation, now and always, to 
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Chapter Five: Responding to External Forces and Events

extract as much value as we can for our taxpayers and the warfighters 

we support with the resources that are made available to us. Nothing in 

the current situation changes that, despite the fact that everything, and 

I mean everything, about sequestration, including: idle operators who 

should be training, facilities that are being allowed to deteriorate, equipment that isn’t being maintained, research and development that is extended unnecessarily, disrupted test plans, and production that is at less 

economical quantities creates inefficiency and lowers our capabilities. It 

does not, however, change our fundamental duty to be as efficient and 

productive as we can be under any circumstances. We all know that the 

effects of sequestration are real, even if they are not dramatic and highly 

visible because of the way the cuts are distributed across the Department. We all know that this is no way to conduct business—but these are 

the cards we have been dealt and we have to play them to the best of our 

ability. Our taxpayers and the warfighters deserve no less. 

Next we have to follow the rules—statutory and regulatory—to the best 

of our ability. We are in uncharted territory to some degree, so you are 

likely to have to consult with your chain of command and appropriate 

government legal authorities to determine the exact constraints you have 

to operate under. Unfortunately the rules were generally not written with 

this situation in mind; it is after all unprecedented. Many of the rules allow for exception and waivers. When that is the case and the effect of 

following the rules leads to even more inefficiency and waste, you should 

seek an exception or a waiver or an interpretation that allow you to do the 

right thing and avoid unnecessary waste. 

Finally most of our work involves contractors and we have an obligation to treat contractors fairly and reasonably under all circumstances 

including these. We should honor contracts we have in place where 

the requirement is still needed. Where the requirement has changed 

due to funding cuts, furloughs of government employees or for some 

other reason, we should modify the contract to address the change in 

requirements provided it will result in savings to the government. In 

either circumstance we need to deal with our contractors equitably and 

with full transparency. 

This is a painful time for all of us. The pain comes in different forms; operators are losing the chance to train and their equipment is not being kept 

ready, many contractors are losing their jobs entirely, and government 

employees are experiencing furloughs. As we make our way through this 

uncharted territory please keep in mind our core responsibility is to get 

as much for the resources we have as possible. We don’t need to make 

sequestration look any worse than it is; that will take care of itself. This 
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Getting Defense Acquisition Right

isn’t about everyone experiencing the same pain in the same way—that 

isn’t possible. It’s about doing our best to perform our duty. 

Frank Kendall 

Under Secretary of Defense 

Acquisition, Technology, and Logistics 

* * * * 

At about the same time I published the next article in this chapter. It deals 

with my expectations for the period lying ahead of the DoD. I noted that 

the period we were in was “the most difficult defense planning and management situation I have ever seen.” The acquisition workforce, indeed the 

whole of DoD, responded to the challenge with remarkable professionalism 

and dedication. Morale may not have been high, but I will always be proud 

of how the Department soldiered on during all the trauma and dysfunction 

we experienced in 2013. We need to ensure this does not happen again. 

The next two articles in this chapter deal with my concerns about the impact of developments by potential adversaries on America’s military technological superiority. For years I have been giving speeches about this concern. After the Cold War and our astonishingly successful campaign in 

the First Gulf War in 1991, we entered a period of unprecedented military 

dominance in conventional warfare. The capabilities we demonstrated in 

1991—stealth, precision munitions, networked forces, wide-area surveillance systems—have been serving us well for the past quarter-century. Unfortunately, all military advantages, including this one, are transient. Our 

potential adversaries have had a quarter-century to analyze and respond to 

the way America fights—and they have done so. 

The first of these two articles deals with the need to protect the future, to 

invest in the research and development needed to move new weapons systems through the new product pipeline and into the hands of our military 

operators. It lays out the reasons why investment in research and development should not be neglected, even in times of tight budgets when there are 

many competing demands for resources. In brief, our technological superiority is not assured, research and development is not a variable cost, and 

time is not a recoverable asset. We ignore these tenets at our peril. 

The second of these articles explains with more specificity why I decided in 2014 to issue and implement a third version of Better Buying 

Power. This version retained many of the initiatives from the earlier 

versions that had emphasized cost control and professionalism, but 

added emphasis on actions that could be taken to increase innovation 

and move technically and militarily higher quality products to our 

warfighters more effectively. 
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Defense acquisition also must deal with the external impact of political 

change, including general elections every 4 years. Political appointees often 

change with even higher frequency. One of my goals has been to remain 

in office long enough to provide consistent policy direction and effect real 

change. I have seen other leaders scramble to achieve all their goals during 

their last few months in their positions, and I wanted to avoid that. 

The theme I chose for the 2016 election year was “sustaining momentum.” 

In other words, let’s keep doing what we’ve been doing and let’s focus on 

doing it even more effectively. As I will discuss in the next chapter, the DoD 

has built up momentum in the right direction and substantially improved 

acquisition performance. If external factors, such as congressional reform 

efforts, don’t disrupt that progress, the right thing to do is remain focused 

and to keep moving in the direction of proven results. The next article in 

this chapter provides a summary of the areas in which momentum has 

been achieved and needs to be sustained. Most of these areas of progress 

have their origin in Better Buying Power initiatives. 

The final “outside force” I will discuss is the most important of all—the 

customers for defense acquisition, our military operational communities 

and their leadership, including the Service Chiefs. A tight relationship—in 

fact, a close partnership—between operational customers and acquisition 

professionals is an important element of acquisition success. At one time, 

early in my career, operators wrote requirements for weapons systems, 

handed them to acquisition personnel, and waited for the desired product 

to arrive. We are long past those days, but there remains a strong need for 

close and continuous cooperation and teamwork between these communities. Both have special expertise, and both need to recognize the value of 

that special expertise to each other as weapons systems are defined, developed, produced, and fielded. Both communities have crucial roles to play, 

throughout the life cycle of our defense products. To be successful, they 

have to work together as one team. 

Recently, the Congress acted to increase the role of the Service Chiefs in 

acquisition. The DoD and I fully supported this provision. The Service 

Chiefs are responsible for defining the requirements for weapons systems, and they have overall responsibility for the Services’ budgets where 

programs are funded. They also oversee and direct the management of 

Service personnel systems, which directly affect the health of the acquisition workforce. Each of these responsibilities is tightly coupled to acquisition success. 

There are, however, aspects of acquisition that Service Chiefs should influence but generally not control. These include for example: acquisition 

strategy decisions including contract type, technical risk mitigation, tech­
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nical maturity and concurrency risk, testing adequacy, and development 

cycle time. Most chiefs have no expertise in these areas, and history has 

demonstrated very clearly that, given the opportunity to do so, they will 

tend toward optimism and higher risk program planning. Therefore, a 

close working partnership between Service military leadership and Service 

acquisition leadership is imperative so that decisions in both areas can be 

fully informed. Operational urgency may dictate a higher-risk, more concurrent program. Conversely, the need for long product life cycles and low 

sustainment costs may dictate a more robust design with more reliability 

growth and testing. This chapter includes a letter that I sent to the Service 

Chiefs laying out my views on how they could best work with the acquisition community to improve defense acquisition in their Services. 

The final article in this chapter is really intended for the Service operational 

leadership and also for the Service Chiefs. It is based on thinking that was 

stimulated by two conversations I had; one with Secretary Panetta and the 

other with the Chief of Staff of the Army, General Mark Milley. Both had 

raised the subject of why we couldn’t do new weapons systems faster. My 

immediate reaction, and an accurate one, when Secretary Panetta asked 

me this in our first one-on-one meeting was “complexity.” That was correct, but where does the complexity originate? The answer is that it comes 

from operational user community requirements. 

There are two kinds of operational user requirements—first, basic military 

performance and, second, all the other desirable attributes or features the 

user wants in a weapon system that likely will be in the inventory for decades. The point of this article is that the acquisition community will respond to user requirements, and if you want something quickly (always the 

desire) with just basic military performance features, we can do that for 

you—but be careful what you ask for. Technologists and engineers, like me, 

love to build creative new things that are better than all preceding products 

at what they do. We do not particularly enjoy the myriad design details associated with manufacturability, reliability, maintainability, cyber security, full weather and environment compatibility, human interfaces, training 

systems, ease of field support, and many other features that are considered 

in a high quality product. 

The article was written to clarify that there is a real trade-off between length and cost of development (time to market) and the quality of the product that will be delivered. The article includes several examples of cases in which the desire for speed has had disastrous results, 

but it also discusses as I did in an earlier chapter, some successes like 

MRAPs. Accelerated or rapid acquisition definitely has its place, but it 

isn’t free, and it certainly isn’t “acquisition magic.” User communities 
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need to understand that there is no acquisition “magic” that produces 

everything they want on a much shorter timeline, although plenty of people and institutions will promise that—in return for large sums of money, 

of course. The price of rapid acquisition is higher risk in cost, schedule and 

performance, and, as importantly, a reduction in quality. Sometimes that’s 

a smart decision, and sometimes it is not. 
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Moving Forward 


Reprinted from Defense AT&L: January-February 2013 

I wanted to take this opportunity, with the general election now behind us, 

to give Defense AT&L magazine readers a sense of what we can expect during the next few years. First of all, we can expect to be challenged. Budgets 

are shrinking and threats to our national security are not. The department 

has articulated a sound strategy, and, unless there are major budget reductions to come and we are forced to make revisions, we will be charged 

with supporting that strategy through effective acquisition of products and 

services across the full spectrum of Defense Department needs. We must 

do everything we can to execute effectively—to extract full value from the 

money with which we are entrusted. Over the next several years, I will do 

everything I can to help you perform that challenging duty. 

When I replaced Dr. Ashton Carter in an acting capacity over a year ago, 

I articulated six priorities: support ongoing operations, achieve affordable 

programs, improve efficiency, strengthen the industrial base, strengthen 

the acquisition workforce, and protect the future. You can expect those 

priorities to remain in place. 

I recently introduced the “for comment” version of Better Buying Power 

(BBP) 2.0. BBP 2.0 is the next step in a process of continuous improvement. 

Like BBP 1.0, it is not intended to be a “school solution” or a checklist of 

ideas for you to unthinkingly “check off.” BBP 2.0 is consistent with my 

goals and priorities, and it is designed in large part to drive critical thought 

in the daily execution of our work. BBP 2.0 will help improve our effectiveness in the tradecraft of acquisition. There is no single “schoolbook” 

answer in this business, and as we move forward on BBP 2.0 over the next 

year or two, we will learn from our joint experiences and make adjustments 

as necessary. We will identify and share new best practices, and we will 

reject or modify the ideas that turn out to be impractical or ineffective. You 

can expect future versions of BBP as together we learn about and discover 

what works and what doesn’t. 

Increasingly, we will measure our own performance and try to learn from 

those who are most successful at acquiring products and services for our 

warfighters. This winter I will publish the first edition of what I intend to be 

an annual AT&L publication on “The Performance of the Defense Acquisition System.” For the first time in my experience, we will begin to measure 

the trends in our own performance and to understand, through data and 
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analysis, the root causes of superior performance. You can expect that this 

report will be updated annually and that it will contain increasingly sophisticated assessments of our ability to execute programs of various types, 

of the productivity of Department of Defense institutions, and of the firms 

in the defense industrial base. 

This winter, hopefully before this article goes to press, I will issue the coordination draft of the new DoDI 5000.02. This draft will update 5000.02 

to be consistent with current law. It also will provide a range of models for 

structuring programs, and it will emphasize the need to tailor our acquisition approaches to the natural workflow and decision points for the product being developed and fielded. I will expect the principles embodied in 

the new 5000.02 to be used immediately while the document goes through 

the standard review cycle. 

The process of rewriting DoDI 5000.02 has made clear to me that over the 

years an increasingly complex web of statutory direction has significantly 

complicated the lives of our key leaders, particularly our program managers. As a result, I have asked my chief of staff, Andrew Hunter, to form a 

team with other stakeholders, working with interested parties from Congress, to prepare a legislative proposal that would provide a single coherent 

and simplified body of law to guide the defense acquisition system. The 

goal is to have this completed and submitted to Congress within 1 year. 

Finally, you can expect my continued support and dedication to giving you 

all of the tools you need to be effective. You, the total acquisition workforce—and I include in this grouping all of you who are involved in technology development, logistics, and sustainment activities of all types, as 

well as those working in the traditional product development and production activities—are the key to our success. 

The next few years are not going to be easy. I expect that the Department will 

be stretched significantly as we attempt to retain the force structure needed 

to execute our national security strategy while simultaneously maintaining 

readiness, sustaining infrastructure, recapitalizing or modernizing aging 

equipment, introducing innovative technologies, preserving our industrial 

base, and ensuring the continuing technological superiority that our forces 

have every right to expect. Our success depends on your ability to execute 

the overall AT&L mission: supporting the warfighter and protecting the 

taxpayer. I look forward to meeting this challenge with you. 
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What Lies Ahead
 

Reprinted from Defense AT&L: July-August 2013 

I usually write about acquisition policy and best practices, but given our 

current circumstances I felt I should provide you with some thoughts on 

the highly unusual and unfortunate budget situation we face. 

I want to begin by thanking everyone who works in defense acquisition, 

technology, and logistics for all the hard work, dedication, professionalism, 

and, increasingly, the patience and fortitude that you display. This includes 

our military personnel and government employees and also our industry 

partners. We provide our warfighters with the best equipment in the world, 

and we sustain and support that equipment so our warfighters know they 

can count on it when they need it. We all know we aren’t perfect—there 

is room to be more efficient, and all of us can learn from our experiences, 

education, and training and become more capable. Nonetheless, all of us 

work hard every day to provide capability to our warfighters and value to 

the American taxpayers who provide us with the resources for which we 

are stewards. 

In the next few months and possibly years, our work ethic, dedication, and 

professionalism, and, yes, our patience and fortitude are going to be needed. I started my military career in 1966 as an ROTC cadet. A year later I 

entered West Point and, while I didn’t serve in Vietnam, I did serve during 

the turmoil of the Vietnam era and in the aftermath. Later I served in the 

Pentagon during the final years of the Cold War as the Goldwater-Nichols 

Act was being implemented. I was in the Pentagon for the first few years 

of the transition after the fall of the Berlin Wall. After that, I experienced 

the defense drawdown of the 1990s from industry’s perspective. In all my 

experience, I have never seen a situation like the one we are trying to cope 

with today. After Vietnam, and again after the Cold War, the Department 

of Defense went through a period of transition that included major changes in defense budgets and force composition. But today we are confronted 

with the most difficult defense planning and management situation I ever 

have seen. 

What makes this environment so difficult in part is the uncertainty and 

the lack of stability in our budgets and, therefore, in our planning activities. Defense is a cyclical business—budgets do not follow a straight line 

but generally correlate to perceptions of national security needs. Today we 

are looking at sharp reductions in our budgets—not because threats to our 
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national security are diminished (in fact, the opposite is true) but because 

of concerns about annual deficit levels and the size of the national debt, and 

the resulting political gridlock about how to address these issues. The sequestration mechanism was put in place to try to force Congress out of this 

gridlock and to obtain a $1.2 trillion reduction in projected deficits. Former 

Deputy Secretary of Defense Bill Lynn said before he left the department 

that “the idea of sequestration was to be so crazy nobody would ever let it 

happen, and they did a really good job.” Not good enough, apparently. 

Like most people in the national security community, I did not expect sequestration to be implemented in January 2013. Technically, I was right—it 

was deferred a few months. But, in the larger sense, I was wrong. I won’t 

belabor this, but after the tax bill passed in January it was clear that Congress would not reach an agreement to avert sequestration permanently 

before it went into effect. 

During the long period leading up to sequestration, the administration and 

the leadership of the department, military and civilian, argued against sequestration and its devastating impact on our military. That impact is real, 

and everyone working in any aspect of defense acquisition reading this article knows this. Sequestration never was going to arrive with the sound 

of trumpets and stacks of contract termination notices and reduction-inforce announcements; it comes more like a steady rain that doesn’t stop 

rather than like a hurricane. But the water keeps rising. Every week we 

compile a list of the actions being taken to absorb the cuts. Individually, 

they are not dramatic: training not conducted, buildings not furnished or 

repaired, maintenance on equipment deferred. The cuts are distributed all 

across the department, and there are thousands of them. In FY2013, the sequestration mechanism gave us no choice about where to absorb the nearly 

$40 billion of spending we have to eliminate. I refer to what we are doing 

now as “damage limitation.” We don’t have the flexibility to do much else. 

We are using reprogramming requests to address our greatest readiness 

needs and some high-priority investment needs, but serious shortfalls will 

remain. Many of the things we are doing amount to a decrease in our productivity (stretched-out development programs, reduced economic production quantities) and work deferred into future budgets. Probably worst 

of all is the impact sequestration will have on the readiness of the force, 

now and into the future. As a former Army officer who lived the readiness crisis of the 1970s in a combat arms unit in West Germany, I understand the fragility of readiness and what it takes to recover once people and 

equipment have lost their edge. 

As I write, we also are on the path to implementing furloughs that will 

make almost $2 billion available for our highest-priority remaining 
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shortfalls. I want you to know that Secretary Chuck Hagel worked very 

hard to find a way to avoid taking this step. In the end, he felt he had no 

choice, and he made the difficult decision to proceed with as minimal a 

level of furloughs as possible. We know how difficult this will be for our 

workforce, particularly those in the lower pay scales. Senate-confirmed political appointees like me are not legally subject to furloughs, but many (if 

not all) of us, including me, will be sacrificing an equivalent share of our 

pay. The department’s leadership will continue to look for ways to reduce 

this burden. 

What will happen next? Our hope, and the administration’s goal, is a political compromise that will resolve the impasse in the Congress and detrigger sequestration. The next forcing function for such a deal might be 

the requirement to raise the debt ceiling that Congress will confront in the 

late summer or early fall. Even if an agreement can be reached, that will be 

very late to impact FY2013 spending. I’m afraid there is a good chance that 

the debt ceiling issue will be resolved without a grand bargain that allows 

Congress to remove the remaining 9 years of sequestration ($50 billion a 

year). As a result, sequestration may stay in place as the default mechanism 

determining the level of our resources. 

As I write, the department is nearing the conclusion of the Strategic Choices Management Review that Secretary Hagel directed Deputy Secretary 

Ashton Carter and Gen. Martin Dempsey to lead. This review is assessing 

the implications of significantly reduced budgets for the department. The 

current budget options on the table include the House of Representatives’ 

budget resolution that does not cut defense, the Senate Budget Resolution 

that removes about $250 billion (mostly outside the Five Year Defense Plan 

[FYDP]), and the President’s Budget Submission, which removes about $150 

billion(also mostly outside the FYDP). Sequestration of course removes $50 

billion per year, starting immediately. Under the circumstances, it is only 

prudent to assess the implications of significant reductions. The FY2014 

budget that the president submitted is consistent with the Security Strategy 

that we announced in 2012 and provides for the resources the administration believes are needed for national security. 

The frightening scenario that may confront us looks like this: Congress 

remains gridlocked and the uncertainty about future budgets continues 

at least through FY2014. We start FY2014 under a Continuing Resolution 

(CR) that funds the department at the FY2013 level. The funds we now are 

executing in FY2013 already include cuts to the levels required by sequestration, and that is the level we would receive under a CR. In effect, sequester already would be built into an FY2014 CR. Under a CR, the department 

still would be constrained to keep funds in the same budget accounts, but 
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not as constrained as we were this year where essentially each budget line 

had to take the same reduction. In this scenario, Congress does not have 

to determine where the cuts occur; it can leave that politically painful task 

to the sequestration mechanism and the department. If past experience is 

any guide, Congress also may not allow the department to take some of the 

steps (such as Base Realignment and Closure [BRAC] and early ship retirements) it needs to take to eliminate low value added or unneeded expenses. 

I think this is the worst-case scenario the acquisition community needs 

to be prepared to manage through, until we know more or receive other 

guidance. Will furloughs be necessary under this scenario? I don’t know. 

I can promise that the department’s leadership will do whatever it can to 

avoid them. Under this scenario, we still will not know what the department’s ultimate budget levels will be. This uncertainty will make long-term 

planning all but impossible. We will have our share of challenges in defense 

acquisition. 

In normal times, the resources are balanced by the department’s budget 

among force structure (the size and composition of the force), readiness 

(training and maintenance), and investment (research and production of 

equipment to modernize and recapitalize the force structure). Each of these 

major spending categories depends on the other; a healthy Department of 

Defense keeps them in balance. When that balance is skewed for any length 

of time, the result is a “hollow force,” such as the one I experienced in the 

1970s when readiness was underfunded for a period of years. In addition 

to not knowing what size force to design the department around and resource, the precipitous cuts required by sequestration compound the problem. Force structure cannot be reduced overnight; it takes time to bring the 

force down. Because of that fact, immediate cuts fall on other parts of the 

budget—readiness or investment. Today we are at war, and the readiness of 

our deployed units and those preparing to deploy is of the highest priority. 

That leaves investment, which has to absorb a disproportionate part of the 

reductions until force structure is reduced. Remember, however, that in 

this scenario we lurch into FY2014 under a CR with no resolution of the 

long-term budgets we can expect and, therefore, no clear indication of how 

far our force structure should be reduced or how quickly. Finally, just to 

make matters worse, we also have the problem of the work we deferred in 

FY2013 as we were trying to absorb the sequestration cuts in the last half of 

the fiscal year. We will have to adjust our FY2014 plans to take this deferred 

work into account. 

I have written this piece for two reasons. One reason is to let you know how 

I see the situation and what we need to be prepared for. The second is to 

again thank you for all that you do, and will do, for our country. I’m afraid 
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that more is about to be asked of us. I say “us” because of my background 

and because my intention is to be with you through the next several years. 

The Defense Department’s total acquisition community, and the industrial 

base that is part of that community, provide two of the three pillars of the 

department; we are not the warfighting force itself, but that force’s technological superiority and rate of recapitalization, and its material readiness 

levels, will depend on how well we do our jobs in the difficult months that 

may lie ahead. 
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Protecting the Future
 

Reprinted from Defense AT&L: May-June 2014 

If you’ve heard me speak recently or read about any of my recent congressional testimony, you may be aware that I’m fairly vocal about my concerns 

regarding our ability to sustain the unchallenged technological superiority 

our military has enjoyed for several decades. This isn’t a new concern, but 

given the budget cuts we face and the difficult trade-offs among competing 

needs for force structure, readiness and investment, I decided it was time 

to be much more public and vocal about our current and future risks. The 

Secretary and the acting Deputy Secretary have been extremely supportive 

and are expressing the same concerns. 

One of my priorities as USD(AT&L) is “Protect the Future.” In October 

2011, I added this item to the list of priorities I had articulated as Principal Deputy Under Secretary in 2010. “Protect the Future” spans several 

areas. It includes keeping alive the capabilities we developed to support 

the two-prolonged counterinsurgency campaigns we have waged in Iraq 

and Afghanistan—we may need them again. On this list are items like contingency contracting, counters to improvised explosive devices, and rapid 

acquisition in general. “Protect the Future” includes the protection of our 

science and technology accounts. It would also include protecting the gains 

we have made in staffing and training the acquisition workforce using the 

Defense Acquisition Workforce Fund. Most of all, however, I am concerned 

about protecting the adequacy of our research and development investments in capabilities and systems that will allow us to dominate on future 

battlefields and keep engineering design teams that develop advanced defense systems. 

The department is dealing with an unprecedented level of uncertainty 

about our future budgets. It is normal to have a small gap between the requested budget and the appropriated one, but not on the order with which 

we have been forced to cope. The large gap between the budgets we have 

been requesting and what we could receive under sequestration is a planning nightmare. The president’s budget this year acknowledges this disconnect. We are asking for an FY 2015 number that complies with the Bipartisan Budget Act, but the president is appropriately requesting additional 

funds for defense in the Opportunity, Growth and Security Initiative. In 

FY 2016 and beyond, our request narrows the gap between sequestration 

and our hopes by about half, but this still leaves us with a significant band 

of uncertainty. Whatever the ultimate result, we live in a world of reduced 
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resources and a world in which we may plan based on an assumption of 

substantially more resources than may actually be provided. 

In this environment there is a tendency to hang on to what we have—namely, force structure and programs that are already in production. There is 

also a strong desire to keep the readiness of our forces at acceptable levels. 

Having lived through the readiness crisis of the 1970s as an Army officer 

stationed in West Germany, I can appreciate this desire. Nevertheless I will 

continue to argue that we need to properly balance readiness, force structure and modernization, while preserving our research and development 

activities. Here are three reasons why I believe preservation of research and 

development is necessary. 

First, technological superiority is not assured. Ever since returning to government service in the spring of 2010, I begin my day with an intelligence 

update. Because of my role, I tend to focus more than most senior leaders 

on technical intelligence. While a conflict with any specific power may be 

unlikely, it was immediately apparent to me 4 years ago (and nothing has 

changed this view except to reinforce it) that China in particular, but also 

Russia and other states, are developing cutting-edge military capabilities 

that are designed to defeat current and planned U.S. capabilities. We have 

had the luxury of living for a long time off technological capital largely 

developed during the Cold War. We demonstrated dominant operational 

effectiveness in the first Gulf War, which was won in a very short time with 

many fewer casualties than anyone expected. Our advances in stealth, precision weapons, networking and wide-area surveillance combined to give 

us an unprecedented level of military capability. We used these same fielded 

technologies in Serbia, in Afghanistan and in the invasion of Iraq. Potential 

adversaries saw what we had demonstrated so clearly over 20 years ago, and 

they took action. In the meantime, I’m afraid we have been complacent and 

tended to take our technological advantage for granted. We also have been 

focused for more than a decade of intense counterinsurgency campaigns. 

What areas concern me the most? The areas we refer to loosely as A2AD 

for Anti-Access and Area Denial. Our ability to project power around the 

globe depends on an array of assets and actions that include our spacebased global-positioning systems, our communications and sensors, our 

long-range strike, our ability to move carrier-based strike forward, our 

networks, forward basing (including airfields and command, control and 

communication as well as logistics nodes), and our ability to be dominant 

in the air. These are all areas in which we are being challenged with both 

current capabilities and capabilities still in development. This bears repeating. While a conflict with any specific power may be unlikely, I do not want 

to live in a world in which the United States no longer is the dominant 
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military power or in which potential adversaries may possess equipment 

(from any source) that would remove the advantage our warfighters have 

depended on for so long. 

My second point is that research and development is not a variable cost. 

This is not an obvious point to many people, and in the past there has been 

a tendency to reduce research and development more or less proportionately to other budget reductions. This can be dangerous, if done in excess, 

because research and development costs are not related to the size of our 

force or the size of the inventory we intend to support. The cost of developing a new weapons system is the same no matter how many of that system 

we intend to produce. If we don’t do the research and development for a 

new system, then the number of systems of that type we will have is zero. 

It is not variable. 

Third and finally, time is not a recoverable asset. It takes a certain amount 

of time to develop a new system, test it and put it into production. Time lost 

is, for the most part, not recoverable. By taking higher risks and accepting 

inefficiencies and higher costs, we can reduce the “time to market” of a new 

weapon system. This approach was used successfully to field MRAPs for 

the conflicts in Iraq and Afghanistan; however, MRAPs are not complex 

cutting-edge weapon systems. Nominally, it takes about 10 to 15 years from 

conception until we have a modern complex system in the field in operationally meaningful numbers. Even during the 1940s we had to fight World 

War II largely with systems that were in development years before the war 

began. We can shorten, but not eliminate, the time required to field new 

cutting-edge weapons systems. 

Fortunately the department’s leadership understands and supports these 

views. As Secretary Hagel made clear, we must strike a balance between 

our ability to meet current global requirements, maintain a trained and 

sustained force that can meet near-term needs and at the same time “protect the future” by continuing our highest-priority research and development programs and the science and technology programs that feed them. 

The Secretary, senior leadership in the Office of the Secretary of Defense 

and in the Joint Staff and the Services all tried to strike the right balance as 

we built the Future Years Defense Program. 

That brings me to our role in defense acquisition, technology and logistics. 

The efficiencies we continue working on under the Better Buying Power 

label are some of the tools we have to help sustain technological superiority. 

Every dollar of cost savings from a successful “should cost” initiative, every 

business deal we negotiate that provides better value to the government 

and every successful incentive structure we implement with industry will 

allow us to invest more in future technological superiority. We also have 
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to become better at working with the operational requirements communities. By focusing on performance features that really matter militarily, this 

relationship helps ensure we provide the users with products that give them 

advantages they need at an affordable cost. Our technology base work also 

has to be strategically focused on areas that give us a significant operational 

advantage. Our responsibility in these still uncertain times, as always, is to 

deliver as much capability to the warfighter as we can with the resources 

entrusted to us. We will not sustain our technological superiority or “protect the future” unless we succeed. 
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Technological Superiority
 

and Better Buying Power 3.0
 

Reprinted from Defense AT&L: November-December 2014 

Each morning I start my day with a half hour or more devoted to reading the 

latest intelligence. I’ve been doing this for about four-and-a-half years now. 

It took me only a few weeks from the time I came back into government in 

March 2010 to realize that we had a serious problem. Some of the countries 

that might be future adversaries, (or that could at least be counted on to sell 

their weapons to countries that are our adversaries) were clearly developing 

sophisticated weapons designed to defeat the United States’ power-projection forces. Even if war with the United States were unlikely or unintended, 

it was quite obvious to me that the foreign investments I saw in military 

modernization had the objective of enabling the countries concerned to 

deter regional intervention by the American military. 

How did we get here? This journey began after the Cold War and in particular the First Gulf War that followed shortly thereafter. At that time, I 

was the Director of Tactical Warfare Programs in the Office of the Under 

Secretary of Defense for Acquisition. For years, since the 1970s, the Department had been working on a suite of capabilities originally designed 

to overcome the Soviet numerical advantage in Europe. As a young Army 

officer, I had served in Germany in the 1970s and studied firsthand the 

problem that successive echelons of Soviet armor formations posed to 

NATO forces. Our answer to this problem was something called FollowOn-Forces-Attack (FOFA), which had grown out of the Assault Breaker 

technology demonstration program at the Defense Advanced Research 

Projects Agency. The basic idea was to combine wide-area surveillance, 

networked Command, Control and Communications, and precision munitions into an operational concept that would negate the Soviet numerical advantage. The concept could be summed up as “one shot, one kill.” 

From 1989 to 1994, I was responsible for the FOFA programs. In the First 

Gulf War, we had a chance to demonstrate the effectiveness of this concept, and we did so. 

As we started operations against Saddam Hussein, most experts predicted 

thousands of coalition casualties. In the event, the number was only a few 

hundred. The combination of sensors like the JSTARS [Joint Surveillance 

Target Attack Radar System] and precision munitions like Maverick and 
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laser-guided bombs made quick work of Iraqi armor formations. Stealth 

also was introduced to the battlefield to great effect by the F-117. 

The dramatic success of American and coalition forces in 1991 did not go 

unnoticed. No country paid more attention to this stunning display of 

military dominance than China, followed closely by Russia. The First Gulf 

War marked the beginning of a period of American military dominance 

that has lasted more than 20 years. We used the same capabilities, with 

some notable enhancements, in Serbia, Afghanistan, Libya and Iraq. It has 

been a good run, but I am concerned that, unless we act quickly, this period 

will end in the not-too-distant future. 

When I left the Pentagon in 1994, the intelligence estimates suggested that, 

while China might be a concern in the future, the United States then had 

no reason to be worried for 15 to 20 years. It is now 2014, and I am worried. 

There has been more than adequate time for countries like Russia, with 

its energy-revenue-funded military modernization, and China, with its 

spectacular economic growth, to develop counters to what has been called 

either the Military-Technical Revolution or the Revolution in Military Affairs that the United States introduced so dramatically in 1991. 

The foreign modernization programs that I refer to include investments 

in cyber capabilities, counter-space systems, electronic warfare programs, 

land-and-surface-ship attack ballistic and cruise missiles with smart seekers, anti-air weapons, advanced platforms to host these capabilities and 

many more. Taken together, these modernization programs are clearly designed to counter American power projection forces and to ensure that the 

United States does not interfere in the areas close to Russia or China. Even 

if our relationships with these states improve and military confrontation 

is avoided, the capabilities I am concerned about will still quickly proliferate to other states, such as Iran and North Korea. We cannot afford to be 

complacent about our technological superiority, and we cannot allow other 

less-sophisticated threats to distract us from the task of maintaining that 

superiority. This brings us to Better Buying Power 3.0. 

For the last 4 years, our focus in Acquisition, Technology, and Logistics has 

been on improving our business outcomes. Usually, we discuss the Better Buying Power goals in terms of productivity, waste elimination, better 

business deals, and efficient execution of programs and services. In BBP 

3.0, my goal is to shift our emphasis toward the actual products we are 

developing, producing, fielding and maintaining. We will continue our efforts to improve productivity, but the focus of BBP 3.0 is on the results 

we are achieving—particularly our ability to bring innovative and gamechanging technologies into fielded capabilities for the warfighter as quickly 

and efficiently as possible. Our technological superiority is not assured. I 
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also do not expect the budget climate to improve for the foreseeable future. 

Sequestration may well return in Fiscal Year 2016—and, even if it does not, 

the threat is unlikely to be removed entirely. 

We are going to have to work hard to bring the innovation and technology 

we need to our warfighters—and we are going to have to achieve this in a 

very tough environment. 
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Our Theme for 2016—
 

Sustaining Momentum
 

Reprinted from Defense AT&L: March-April 2016 

It’s hardly a secret that we are headed toward a change in administration 

next year. I’ve been through these transitions several times, as have most 

acquisition professionals. During my previous experience in the Pentagon 

organization of the Under Secretary of Defense for Acquisition, Technology, and Logistics, I worked for a total of eight Under Secretaries in as many 

years, and I went through one same-party and one other-party administration change. 

As some of these transitions approached, there were attempts to cram a 

lot of accomplishment into a very short time. This generally caused a lot 

of work and wasn’t very successful. In my case, I have had several years to 

effect the improvements in defense acquisition I thought were most needed. As a result, there won’t be a Better Buying Power (BBP) 4.0 this year 

and, while I do plan to modify Department of Defense Instruction (DoDI) 

5000.02 on the margins and to make it consistent with current law, there 

also won’t be a major acquisition policy rewrite this year, although we will 

be implementing the changes required in the Fiscal Year (FY) 2016 National Defense Authorization Act. We still have a lot to do in implementing 

the existing BBP actions, however. Also, the new DoDI on the acquisition 

of services has just gone into effect, so we still have work to do on implementation of that as well. 

What I would most like to accomplish during the balance of this year is 

to sustain and build on the momentum we have achieved over the last few 

years. I don’t know what will happen in the election, and, depending on 

how it turns out, I also don’t know what opportunities I may have. But I 

do know that we have the better part of a year together in which to make 

more progress on the areas in which we have been working. I also know 

that we are improving acquisition outcomes. The evidence is clear from the 

most recent Annual Report on the Performance of the Defense Acquisition 

System and other data that contract costs and schedule overruns are being 

reduced, as well as cycle time, and that we are tying profit more effectively 

to performance through the use of incentive structures. I would like to discuss some of the actions that stand out as important areas in which to sustain and build on the momentum we have gained as we get ready for a new 

administration next year. 
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Promote Technical Excellence and Innovation: We are well into implementing BBP 3.0, but we have many actions in progress that need to be 

completed. My concerns about technological superiority that motivated 

this edition of BBP are reinforced every time I receive a daily technical 

intelligence update. This year’s budget includes a number of advanced 

technology demonstrators and experimental prototypes and we need to get 

these provisions enacted and the projects started. Steve Welby, who has 

been confirmed as Assistant Secretary of Defense for Research and Engineering, and his teams completed the Long Range Research and Development Planning Program, which was very influential in the FY 2017 budget. 

We are strengthening the ties between operators, intelligence experts, and 

acquisition professionals. We will continue to manage the ongoing actions 

to improve our workforce’s technical capacity, and to extract as much benefit as possible from all of our various Research and Development accounts 

and from industry’s investments. Bill LaPlante has left his position as Assistant Secretary of the Air Force, but his dictum to “own the technical 

baseline” is an enduring imperative to all of our technical and management 

professionals working to bring new products to our warfighters. As I have 

said many times, our technological superiority is being challenged in ways 

we have not seen since the Cold War, and we must respond. 

Continue Establishing and Enforcing Affordability Analysis and Caps: 

We have been doing this for more than 5 years now, and there is solid evidence that both the analysis process by Service programmers and the enforcement of caps by the acquisition chain and the requirements chain are 

having a beneficial impact. The use of long-term capital planning analysis 

was a new concept when we introduced it, but it is becoming institutionalized. We can’t predict future budgets accurately, but we can do analysis 

now that helps us make better decisions. Enforcing the resulting caps is 

the most difficult aspect of having them, but if the caps are to be meaningful, they have to be enforced. We’ve learned from our experience, but this 

is still an evolving area. The caps should be set at a level that leaves some 

margin; they are neither cost positions nor program baselines, nor budgets. 

They are tools to ensure meaningful long-term capital investment planning 

and to guide cost versus performance trade-offs during development. I am 

hopeful that the Department of Defense (DoD) will continue to establish 

them and enforce them in subsequent administrations. 

Promote Increased Use of “Should Cost” as a Management Practice: 

I believe that in many, but not all, cases “should cost” is now a normal 

part of business. It should be. Every manager should understand the cost 

structure under his or her control, analyze it for savings opportunities, set 

goals to achieve those opportunities and act on those goals. After several 

years of effort, the use of “should cost” has proliferated across the DoD. It is 
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changing thought patterns and behaviors in a positive way. That implementation isn’t uniform, however, and I’m afraid it hasn’t been fully embraced in all cases. Some still regard this initiative as a threat to their budgets, which it is definitely not. Others seem reluctant to set significant goals 

for fear of being unable to attain them. The “culture of spending” isn’t dead 

yet, and the perverse incentive of execution rate targets isn’t going away. 

We need to continue to strike the right balance and to encourage our workforce to do the right thing for both the taxpayer and the warfighter by not 

wasting resources that could be saved and put to a better purpose. Of all the 

BBP initiatives over the years, this is the most fundamental thing we have 

done. Use of “should cost” targets has saved the DoD billions of dollars, 

and we need to continue expanding and supporting its use. 

Provide Strong Incentives to Industry: As I have said and written many 

times, industry is easy to motivate. Corporations exist for the purpose of 

making money for their shareholders, so the motivation tool is obvious and 

effective. The trick for the DoD is to align this self-interest with the DoD’s 

interests, and to do it in a way that will be effective at improving outcomes. 

We’re making progress on this, but I still see some unevenness in how our 

managers structure incentives. It takes good critical thinking to get incentives “right” because we deal with so many different business situations. 

Incentives need to “thread the needle” between being easily achieved and 

impossible so that they do influence behavior. They also need to be meaningful financially both as carrots and sticks, without asking corporations 

to assume an unreasonable amount of risk. I’ll continue to focus on this 

aspect of our acquisition strategies as programs come in for review, and I’ll 

expect managers at all levels to do the same. 

Effectively Manage Intellectual Property: Going back to BBP 1.0, we 

have worked hard to mature our collective understanding of how to protect the government’s interests while also respecting industry’s property 

rights. This is a complex area of law and one in which the DoD was at a 

longtime disadvantage relative to industry. I occasionally still wrestle with 

cases of “vendor lock” based on proprietary content. Hopefully, we have all 

but stopped the practice of just accepting industry assertions of property 

rights. We need to continue to grow our expertise in this area and spread 

the best practices associated with effective management of intellectual 

property. 

It’s perfectly legitimate for a company to expect a reasonable return on the 

intellectual property it has developed or acquired. In general, that return 

should be in the competitive advantage conveyed by superior technology or 

lower costs. On the other hand, the use of intellectual property by a firm to 

sustain a decades-long grip on the aftermarket for a product is something 
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the DoD should and can work to prevent. We’re getting better at this, but 

our efforts need to be sustained and broadened. 

Acquire Modular Designs and Open Systems: This idea is anything but 

new. However, our practice has traditionally not matched our policy. It 

takes active technical management of design architectures and interfaces to make both open systems and modularity a reality. This is “owning 

the technical baseline,” and the devil really is in the details. Assertions of 

modularity and openness are not always valid. There are also always cost 

impacts and design trades that work against achieving these goals. We can 

point to a few successes in this area over the last several years; each Military Service can take credit for programs to provide open architectures in 

general and modular designs on some specific platforms. The Long Range 

Strike Bomber is a notable example. This effort should continue and expand, but success will require a technical management workforce that is 

trained, experienced and empowered. 

Use Monetized Performance Levels in Source Selection: We’ve had several notable successes with this initiative. They include the Combat Rescue 

Helicopter, the Joint Light Tactical Vehicle, and the Amphibious Combat 

Vehicle. This is a relatively new concept; it asks the requirements community to do something that it has traditionally resisted—put priorities 

and relative value on requirements. Industry traditionally would simply 

bid threshold values of performance. This initiative gives industry a reason 

to aim higher, as long as it can do so for a reasonable cost. By providing 

industry with information on how much we are willing to pay, and how 

much competitive source selection evaluation cost credit we will give in 

an evaluated price, we motivate industry to create better products for us. 

We also get the benefit of more objective source selections. This is a useful property in a period in which protests are more common. The fact is 

we have to make these best value judgments anyway. We are better off to 

make them rationally prior to asking for bids. I hope to see several more 

successful examples of this approach over the balance of the year and to see 

it continued indefinitely. 

Improve the Acquisition of Services: With the publication of DoDI 

5000.74, we marked the transition to a more structured way of looking at 

management of contracted services acquisitions. This is one culmination of 

a series of steps that date back to BBP 1.0, where we took Air Force initiatives introduced by now LTG Wendy Masiello when she was the Air Force’s 

Program Executive Officer (PEO) for Services Acquisition and expanded 

them to the rest of DoD. Over the last several years, we have built on these 

initial steps. Despite this progress, I remain convinced that this area of 

spending, which is now well above the spending on products, offers the 
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greatest potential for savings and efficiency in the DoD. My Principal Deputy, Alan Estevez, has led this effort and it is starting to pay big dividends. 

As we go through this year and gain experience implementing the new 

DoDI, I would expect us to gain insights that will lead to some modifications, but overall I think we are the right track. This is one area in which 

I will ask the Service Secretaries and Chiefs to become more involved. A 

great deal of contracted services are acquired and managed outside the 

standard acquisition chain and institutions. As Gen. David Petraeus once 

wrote to his staff in Afghanistan, “Contracting is commanders’ business.” 

This is as true outside the operational contingency arena as it has been in 

Afghanistan and Iraq. However, many of our operational and institutional 

leaders are not focused on the management of these extensive resources. 

During the coming year, we can and will do more to change that. 

Continue Our Annual Acquisition Assessment Activities: We have instituted three sources of annual assessments that will be continued this 

year. They are: the Annual Report on the Performance of the Defense Acquisition System, the Annual Preferred Supplier Program, and the Program 

Mangers’ Annual Assessments. The first of these provides a growing body 

of statistical data and analysis on the performance of the acquisition system using a range of metrics. The third edition, released last fall, shows 

strong evidence of improved performance over the last several years. Each 

year we have added additional data and analysis to this volume and we 

will continue to do so this year. The second item provides public feedback 

to industry on the relative performance of major business units based on 

the Contractor Performance Assessment Reporting System (CPARS). We 

struggled to get this off the ground, but thanks to the Navy’s pilot effort 

led by Sean Stackley and Elliot Branch we were finally successful. Last year, 

all three Military Departments published their results simultaneously. We 

will continue that practice this year. The third item is the Program Manager’s Annual Assessments, of which I published a subset last fall. I published them (with the writers’ permissions) because I was very impressed 

with the inputs I received and because I thought providing them to a wider 

audience was a great way to educate outside stakeholders on the great variety of real life problems that our program managers face, and how professionally they deal with those problems. I recently requested this year’s 

assessments and they will be submitted by the time this piece is published. 

At the PEOs’ request, I am also giving PEOs an opportunity to provide a 

similar input. I will do my best to dedicate two solid weeks to reading and 

responding to each of the 180 odd assessments I will receive. Last year’s 

reports highlighted a number of problems and opportunities that needed 

to be addressed; and I expect the same this year. I also will request another 

round at the end of 2016. 
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Build Even Greater Professionalism: The DoD has an incredibly professional workforce. When building professionalism was introduced in BBP 

2.0, there were some who took that as an assertion that our workforce is 

not professional. Nothing is further from the truth. However, we all can 

become even more professional through experience, training, education 

and personal effort. None of us should ever be complacent; there is always 

more to learn and always opportunity for increased levels of expertise and 

broader experience. We also all have a duty to improve the professionalism of those who work with and for us. If there is one legacy each of us 

should strive for, it is to leave a more professional workforce behind us than 

we found when we arrived. We are fortunate to have the support of the 

Congress and Secretary of Defense Ashton Carter in this endeavor. Our 

Director of the Human Capital Initiative for acquisition personnel, Rene 

Thomas-Rizzo, has worked hard with the Under Secretary for Personnel 

and Readiness Brad R. Carson to include provisions in Secretary’s Force 

of the Future initiatives that will benefit our workforce. We will work hard 

with the Congress and internally to see those initiatives enacted this year. 

Increase the Involvement of the Service Chiefs in Acquisition: The most 

recent National Defense Authorization Act included provisions strengthening the Service Chiefs role in acquisition. I fully support this direction 

and have already met with all four Service Chiefs to discuss their role. The 

areas in which I think they can make the greatest contribution are in requirements, budgeting and personnel. As stated above, I also think they 

can do much to improve the management of acquisition activities that take 

place outside the acquisition chain of command. During the year we will 

be implementing this direction. 

The BBP initiatives have spanned several major areas of emphasis, included 

dozens of specific initiatives, and involved more than 100 actions—in each 

version. There also have been any number of steps we have taken over the 

past several years to improve acquisition outcomes across the full range of 

products and services that DoD acquires. Many of them have been outside 

the specifics of the BBP initiatives. 

Underlying all this effort are some fundamental cultural goals. One of 

them is to move from being a culture that focuses on spending to one that 

focuses on controlling costs. This may be the area in which we have made 

the greatest gains. Another has been to encourage a culture that values 

and encourages the critical thinking needed to confront the huge range 

of problems acquisition professionals must deal with. We are not engaged 

in cookbook activities where one way of doing business always works. A 

third goal is to achieve the widespread appreciation of, and a culture that 

values, professionalism inside our workforce and, perhaps more important, 
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outside it. Our success depends entirely on the efforts of thousands of true 

professionals in the full range of disciplines needed for new product design, 

testing, production, and support. Finally, there is the resurgent importance 

of being a culture that values and rewards the technical excellence and innovation needed to stay ahead of the committed and capable adversaries 

we may face in combat. Building and sustaining these aspects of our culture is a task that should never end. 
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MEMORANDUM FOR CHIEFS OF THE MILITARY SERVICES 

SUBJECT: Defense Acquisition 

December 8, 2016 

Dear Military Department and Service Leadership: 

For literally years I have been mentally composing a letter to you on your 

role in Defense Acquisition and how you can help make your Service’s acquisition efforts be more successful. With the recent changes in Service 

civilian and military leadership, as well as the changes in the FY 2016 National Defense Acquisition Act (NDAA), which I fully support and which 

affects your role, it seems like a good time to set my thoughts down and 

provide them to you. I’d like to start by talking about the aspects of defense acquisition where I think you can have the most positive impact; 

requirements, budget, and—most of all—the acquisition workforce. I follow that with some comments on things to avoid, some thoughts on our 

relationship to industry, and close with some comments on my role in 

defense acquisition. 

I encourage you to actively manage requirements and major requirement trades at your level. All acquisition programs start with user requirements –they drive everything in the program; the risk profile and 

resulting reduction and mitigation phases and activities, the contracting 

approach and incentives, and the test program structure, just to name a 

few. Acquisition programs can get into trouble in a lot of ways, but if the 

requirements are not reasonably achievable and clearly stated so that 

they can be put on contract and tested, the program is likely to be headed 

for trouble from day one. Each Service has its own structure and authorities for determining and setting requirements. This in itself is not the 

source of the problems in requirements that I’ve observed. In my experience I have most often seen the following problems with requirements 

set by the Services: technical infeasibility, arbitrary levels with marginal 

operational benefits achieved only at high cost (most often in the area of 

reliability numbers, but sometimes in other performance levels), vagueness, and rigidity. Getting requirements to the right place depends on an 

open, constructive, and continuous interchange between operational, intelligence, and acquisition communities. You can have a major and positive influence in this area. 

One of the Better Buying Power initiatives, monetizing differences in desired performance levels, has an important impact on the requirements 

communities. The idea behind this is simple; if we tell industry how 

much we are willing to pay for higher performance levels and give them 

monetary credit for offering higher performance levels when they bid 
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competitively, than they are more likely to offer the performance we 

want—and to do so at a reasonable price. Historically we have set Threshold and Objective level requirements. Industry then bids the threshold 

level and ignores the objective level, which invariably is more expensive 

and therefore less competitive. By telling industry how much in dollars 

we value higher performance (meaning how much more we are prepared 

to pay for it—this has nothing to do with what it costs), and by giving 

industry an evaluated price adjustment in source selection, we provide 

a meaningful incentive to industry to be innovative and offer us more 

capability. Without this we default to threshold levels. This concept is 

working, but it depends on Service leadership support and the willingness of the requirements communities to prioritize and to set a value on 

different levels of performance. 

Another aspect of getting requirements right is the willingness to adjust 

as changes occur and knowledge increases. Here you can play a major 

role in streamlining decision making and encouraging the elevation of requests for needed changes. In each Service, requirements are approved 

at a senior level (usually the four star level, but not the Service Chief). 

Once requirements have been enshrined in a four star approved document, and for Major Defense Acquisition Programs (MDAPs) blessed by 

the Joint Requirements Oversight Council, it can be very hard and time 

consuming to make needed adjustments. Part of the problem is cultural. 

Lower level operational community officers, usually field grade officers, 

are generally tasked to coordinate with the acquisition community on behalf of the operational community that set the initial requirement. These 

people are not predisposed to go back to their superiors to request a 

change in a four star approved requirement. The Service’s Configuration 

Steering Boards are intended to provide a forum in which requirements 

decisions and trades can be evaluated. Under our current rules, the CSBs 

for MDAPs are supposed to meet at least annually. In the early stages of 

development this is probably not enough. My advice to you is to create a 

climate and mechanism by which both operational staff and acquisition 

staff are encouraged to surface requirements issues early so that needed 

trades can take place before a great deal of time and money is wasted 

pursuing a goal that needs to be changed. 

With the technological superiority challenges DOD faces today, time is a 

more important consideration than ever. One of the more difficult choices we have to make in defense acquisition is whether or not to increase a 

requirement on a program that is well into a multi-year development because of new intelligence on the threat that system will face. Doing this can 

be very disruptive and increase cost and schedule significantly. Sometimes 

a threat change calls the very utility of the program into question. When 
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intelligence reveals a change in the threat, Service operational leadership, 

in consultation with both intelligence, and acquisition leadership should 

make a conscious decision on how to proceed; continue as planned and 

upgrade the system later, change the requirements (and the design and 

the program) now, or cancel the program because it is obsolete already. 

From the acquisition community perspective this is a customer decision 

and the Service leadership is the customer, but it is also one in which acquisition professionals want to be involved so that the operational customer appreciates the full implications of any decision he or she makes. In 

my experience our Program Managers have a bias toward stability—they 

know that more stressing requirements mean increased risk, cost, and 

schedule—but we are building these systems for a reason, to provide the 

warfighter with the tools he needs against potential adversaries, and the 

acquisition community is dedicated to that result. 

Service leadership generally controls the Service’s budget, subject to 

review at the DOD level. Here I would ask simply that you ensure Service acquisition programs are adequately funded. This isn’t easy when 

budgets are tight and it is tempting to talk yourself into “accepting risk” 

by under-funding acquisition programs, thereby keeping more programs 

on the Service’s books. I would urge you to give your acquisition leadership and cost estimators a strong voice as you build your budgets. One 

of the most revealing studies on defense acquisition I have ever seen 

shows a very strong correlation between budget climate (“tight” or “accommodating”) and future cost growth. Going back several decades, 

the evidence is clear that when budgets are tight we are more inclined 

to be optimistic about new program costs. This feels really good until 

reality intervenes, as it always does eventually. While we have been consistently improving our cost performance over the last few years, the 

mean is still well above zero for our programs. Development phases in 

particular tend to overrun, on average about 30%. Early production is 

better behaved, but still overruns about 10% on average. Succumbing to 

the wishful thinking of under-funding programs is contrary to the entire 

history of defense acquisition, and it compounds future problems when 

they inevitably arise. 

I would also ask that you take into full account the long term affordability of programs as you create your Service budgets and decide on any 

new systems the Service will acquire. Most of the program cancellations 

I have observed have been because of long term affordability concerns. 

The most recent one was the Marine Corps Expeditionary Fighting Vehicle, which the Commandant correctly concluded could not be afforded 

in foreseeable Corps budgets under any circumstances. For the past five 

plus years I have been requiring the Services to conduct affordability 
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analyses in order to derive affordability caps for programs. We set affordability “goals” or “targets” early in an acquisition program lifecycle 

and firm them up as “caps” at the time we commit to development for 

production and establish the program’s baseline. Defining these caps is 

not an acquisition community responsibility; they are a Service leadership responsibility. Generally the Service programmers are responsible 

for the analysis and recommending caps, usually caps on unit production 

cost and annual sustainment cost. Those who criticize this approach do 

so based on the difficulty of predicting budgets for the 30 or 40 year life 

cycle of a new program. It is true that we can’t predict budgets accurately; but is also true that conducting affordability analyses now so that we 

can make better decisions now about new starts and program requirements can keep us from embarking on clearly unaffordable programs, 

and it can help us make better informed requirements versus cost trades 

as the program advances and we learn more. This is nothing other than 

prudent long term capital investment planning, and I urge you to support 

it in your Service. 

In the second addition of the Better Buying Power initiatives, I included a 

section on building the professionalism of the acquisition workforce. This 

section in some form should be in any Better Buying Power or other future 

acquisition improvement program. As senior leaders you are fully aware 

of the importance of good leadership and management skills. I’m not sure 

that you are as aware of the importance of professionalism in the acquisition workforce, which includes professionals in about a dozen fields. Those 

fields include management of new product development, engineering, 

contracting, testing, logistics, and maintenance. Each of these, and the 

other acquisition professions, requires special expertise, not just good 

leadership and general management skills, to be successful. I’m particularly concerned that our technical engineering management workforce isn’t 

as large or capable as it should be. Supervising new product development 

is supervising engineering. Anyone managing a development program 

without an appropriate technical background is largely just deciding who 

to trust. In the government we generally do not hire professionals from 

outside; we build them over long careers. This is particularly true of our 

uniformed acquisition professionals, but it is also generally true of our civil 

servants. Senior operational leaders are professionals also, but in different fields; I doubt that any of you would consider putting someone with 

no relevant operational experience in charge of an air wing, or a brigade, 

or an aircraft carrier. I would ask that you do all you can to recognize the 

importance to your Service of our acquisition professionals and that you do 

everything you can to strengthen the professionalism of this critical part of 

your Service. 
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On occasion I have heard senior Service leadership talk about the gap 

between operational and acquisition people in their Service. Many times, 

I have seen evidence of the, for lack of a better word, tribal structure of 

each Service, and how acquisition people are viewed in that structure. At 

a retirement for a senior acquisition flag officer a few years ago, I heard 

the Service Chief complement the retiring officer’s ability to bridge the 

gap between operations and acquisition people. In my opinion this gap is 

a fiction; acquisition people are fully part of the Services. They are very 

much members of the team and very dedicated to the team’s success. 

All acquisition officers should have been through at least one operational 

tour; the operational world is well known to them. Perception is often 

the equivalent of reality, however, and if the operational community perceives the acquisition community as a tribe apart, that will not be lost on 

your acquisition professionals. As leaders of your Services, you can do a 

great deal to counter this perception. What you say and how you say it 

about the acquisition workforce sends powerful messages to that workforce, and to the rest of your Service. Spending time with acquisition organizations and people matters. Ensuring at least equivalent promotion 

rates and the existence of meaningful opportunities for advancement in 

the Service will speak very strongly to your acquisition workforce. 

Throughout the Department, with great support from the Service Acquisition Executives (SAEs), we have encouraged a culture change toward 

cost consciousness and active cost management. As a result, over the 

last several years we have seen significant improvement in acquisition 

outcomes, particularly cost growth. The Department’s most recent “Annual Report on the Performance of the Acquisition System” and other 

data confirms the positive trends. These improvements are the result of 

1,000s of individual decisions by members or the Services’ acquisition 

workforces. They are in part due to an increased focus by our workforce 

on cost control, especially under a management technique that was introduced in 2010 as a Better Buying Power initiative called “should cost.” 

Should cost directs all our mangers to understand and assess their cost 

structures, to identify opportunities for savings, to set targets, and to act 

on those opportunities. Targets are established and documented, and 

managers work to achieve them. The policy is that any savings remain 

within the Service. Savings are not assumed or taken out of budgets until 

they are actually achieved—should costs are “stretch goals” and success 

is not assumed. This is a major cultural shift because our system tends 

to reward spending as opposed to saving. Managers are reviewed for execution rates, and if they aren’t spending their allocated funds quickly 

enough they are subject to reductions. I’ve worked closely with the DOD 

Comptroller through joint reviews in order to make sure that programs 
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are not harmed if their cash flow doesn’t meet established norms. I’d ask 

that you support “should cost” management everywhere we contract 

for products and services and that you encourage your programmers to 

work closely with your acquisition leadership to mitigate the perverse 

incentive to spend no matter what that is associated with execution rate 

enforcement. 

As we continue to experience budgetary stress and execute mandatory workforce reductions, I would ask that you protect your acquisition 

workforce as much as you can. During the late ‘90s we effectively gutted 

our acquisition workforce. Once this was recognized, the Department, 

with support from the Congress, went through a period of increasing the 

workforce in size and increasing its quality through training. This period 

came to an end in about 2012 when sequestration became law and budget cuts started in earnest. We have been fairly successful in protecting 

the gains we made prior to 2012, and under Better Buying Power and 

other initiatives we have increased our focus on developing and retaining the professionals we have. I am very concerned that the Department 

or individual Services may reduce their acquisition workforces in order 

to preserve operational force structure on the margins. I’d ask that you 

pay close attention to this area as you consider both civilian and military 

personnel reductions. In the near term I am seeing problems in the adequacy of our contracting workforce—this shows up as increased time 

to award and as quicker, but not better or more cost effective, forms of 

contracts being more widely used. This can deprive us of needed support 

and it leads to higher costs that dwarf the short term savings. In the longer term it can also mean not having the engineering expertise we need 

to manage contracts with industry. People matter most—no acquisition 

policy anyone can invent will compensate for lack of expertise or capability within your Service’s workforce. 

So far I’ve tried to emphasize the ways in which I think you can help your 

Service’s acquisition efforts move in the right direction. I’d like to address 

the other side of the coin now, the ways in which you might unintentionally do harm. This isn’t speculative. I’ve seen all of this too many times. 

Our military culture includes elements that serve us well operationally; 

a can do spirit, the ability to make decisions in the face of uncertainty, 

strong leadership, obedience to authority. When these same qualities are 

applied to acquisition decisions by leaders with the best of intentions, but 

who know little or nothing of the acquisition professions, the results can 

be unfortunate. 

First of all avoid arbitrary mandates, especially for schedules. The greatest disaster I know of in acquisition history occurred in large part be­
169 

Chapter Five: Responding to External Forces and Events

cause a Service Chief set a totally unrealistic schedule goal. The “can 

do” attitude and respect for authority led the acquisition leadership in 

place to take huge risk, with predictable results. When the Service Chief 

in question retired, four years were added to the schedule, but the damage had already been done. Your acquisition professionals, and historical 

data, provide a good basis for assessing the realism of schedules. The 

simple determiner of schedule is complexity. New product development 

times are driven by the work that had to be done, which is related directly to the complexity of the product. An F-35 is orders of magnitude 

more complex than an MRAP, or almost anything else we’ve ever built. 

Arbitrary performance levels can be problematic also. Both performance 

risk and technical risk were compounded when the Navy was directed to 

change course on the aircraft carrier USS FORD and implement higher 

performance, but higher risk, subsystems more quickly than the Navy’s 

acquisition professionals thought wise. I think it is fair to say that if the 

honest professional judgement of competent acquisition professionals 

had been elicited and listened to in each of these cases, that major problems could have been avoided. Our military culture can make it very hard 

for subordinates to tell senior leadership things they don’t want to hear. 

I would urge you to challenge your acquisition professionals to do better, 

make sure they understand your sense of urgency, but at the same time 

encourage them to be candid and listen to their advice about subjects 

they understand. An analogy I like to use is that of a patient who is told 

by his brain surgeon that an operation on a tumor will take several hours. 

Would you insist that the brain surgeon competed the operation in half 

the recommended time? 

Don’t mistake events like contract awards for real progress; signing a 

bad business deal isn’t progress—it’s a trap that will be sprung later. For 

years we have encouraged our program management and contracting 

people to take the time to get a good business deal for the government 

while treating industry fairly. Sometimes this leads to long negotiations. 

When this is the case your acquisition people will need your support as 

they face industry and sometimes political pressure to get a contract 

awarded. Once we have a signed contract that document defines our relationship to industry for the period of performance of the work; we need 

to get these agreements right, and sometimes that takes time. In every 

negotiation time favors one side or the other; we shouldn’t artificially 

constrain our own negotiators by putting too much pressure on them to 

sign awards so that we can have the appearance of progress. 

Please don’t create additional bureaucracy to fulfill your new formal 

responsibilities. The NDAA requires your concurrence in programs at 

Milestone A (the start of any contracted risk reduction needed prior to 
170 

Getting Defense Acquisition Right

commitment to development for production) and at Milestone B (the 

start of development for production) when we really commit to a program and establish the program baseline for the duration of the product 

lifecycle. For programs for which I am the Milestone Decision Authority 

(MDA) we have introduced a simple way for you to provide this concurrence in writing. For programs for which the Service Acquisition Executive (SAE) is the MDA you will need to work out a similar procedure demonstrating concurrence. We already have too much bureaucracy as it is, 

and I would urge you not to create more review process or organizations 

to help you with this new statutory requirement. In fact I would urge 

you to examine the existing review and staffing processes within your 

Services to see if it can be reduced. For the past several years (in every 

version of Better Buying Power), the SAEs and I have tried to reduce the 

unproductive bureaucracy associated with acquisition programs. We’ve 

made some progress, but I’m not happy with where we are. This is still a 

work in progress, but the fact is that most of the bureaucracy associated 

with programs exists within the Services rather than OSD, and it is something that you have control over. I would also add that staffing and review 

processes are not the problem with defense acquisition nor are they synonymous with it. They do add overhead to our programs, and they do 

distract our managers from their real work, but the problems with cost, 

schedule, and performance that we encounter are not because of our 

bureaucratic processes, which generally run parallel and concurrent with 

the actual contracted work. The big problem with those processes is that 

they sometimes fail in their fundamental purpose—to prevent programs 

from having major problems that could have been avoided or mitigated. 

Understand the difference between risk reduction prototypes and production prototypes. They both have their purposes, but they are not the 

same thing. Engineers love to build risk reduction prototypes. They don’t 

take as long or cost nearly as much as production prototypes; they include the most interesting and important technical challenges associated with the new product; they provide a gratifying physical demonstration of what a producible product could do; and they provide a basis for 

experimentation with how a production version would be used in practice. They also may also provide some operational capability, on a limited 

scale. Despite all these good things, risk reduction prototypes are not 

a substitute for a complete design that meets reliability and suitability 

requirements and provides all the features our operators need. In a crisis 

we do produce clones of risk reduction prototypes, but when we do so we 

pay a price. Global Hawk provides a good example. It took years to work 

off the supportability problems and the program was nearly canceled in 

favor of the venerable U-2, largely because of high support costs. I’m 
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Chapter Five: Responding to External Forces and Events

 

a big proponent of risk reduction prototyping and experimentation; we 

have a number of demonstrations funded in the FY 17 budget. Please do 

not equate these demonstrators to production prototypes, however. 

I would ask that you be wary of claims of “acquisition magic.” There is 

no acquisition magic. We all share the frustration that programs overrun 

and take longer than we would like. In my forty odd years in defense acquisition I have seen a lot of versions of acquisition magic. While some of 

them included sound ideas that make for marginal improvements, none 

really change the fundamentals. They took the form of Firm Fixed Price 

Development, Total Quality Management, Reinventing Government, Total System Performance, Lead System Integrators, and others. We can 

learn lessons that are sometimes applicable from each of these, but at 

the end of the day new product development and transition to production 

remains what it has always been, a challenge that demands experience 

and professionalism for success and that can never be totally free of risk. 

Creating something new as efficiently as possible means setting reasonable achievable goals (requirements), doing the necessary risk reduction 

to ensure the product has a good chance of being created within reasonable cost and schedules (sometimes, but not always, including full scale 

risk reduction prototypes), planning and executing all the tasks needed 

to complete a design for production that balances many often competing features, making and testing production prototypes, correcting problems and ramping up production. All of this entails risk, and most of this 

is done by industry in a relationship defined by the terms of a contract 

under some degree of Service supervision, which brings me to the next 

topic I want to address; our relationship to industry and your involvement 

in that. 

Industry is very simple to understand. One of the things I liked about 

working in industry is that everyone in a corporation knows what the definition of success is and how it is measured. In short, if something makes 

money for the firm it is good. If it doesn’t it isn’t. Industry tries hard to deliver products to us successfully; when industry fails it isn’t because they 

don’t care about achieving results or aren’t trying. Stronger incentives 

can lead to better performance, but only so much. The more financial 

impact achieving success has, the more industry will focus its efforts, 

its talent, and its resources to achieve success. For example, on average 

development contracts yield about 6% profit. Production contracts yield 

about 11%. That’s a strong a motivation to get through development and 

into production. There is nothing wrong with this system; the quasi-free 

market approach the United States has taken to defense acquisition has 

served us well. Market incentives and competition have been very effective at providing us with the best weapons systems in the world. 
172 

Getting Defense Acquisition Right

One of the things we have tried to do over the last few years is to provide 

stronger financial incentives to industry that align profit with industry 

performance. Industry would on the whole prefer as easy an environment as possible in which to make money, so some of our initiatives have 

not been popular. We have to strike the right balance here; if we squeeze 

industry too hard we will drive firms out of the defense industrial base. 

As we have sharpened our own business practices, however, industry 

has continued to report good margins, so at this point I’m not highly concerned. I am concerned that we have too few new products in our pipe 

line and I am concerned about trends in the structure of our research and 

development accounts and of the industrial base. There are limitations 

to what can be accomplished with financial incentives and you should 

be aware of them. Industry can only absorb so much financial risk, and if 

that risk is realized industry reacts very predictably—as it did in the infamous A-12 case. As a result, the SAEs and I think very carefully before 

we authorize fixed price development contracts. At the end of the day we 

are the ones who need the product, the risk that it will never be produced 

is always ours. 

Service leadership is also often the recipient of marketing by industry. 

I encourage you to be open to discussions with industry; they are the 

source of most of the innovation contained in our weapons systems. To 

be successful they need to know our requirements and challenges, and 

we need to hear their concerns and ideas. While self-interest can safely 

be presumed, that doesn’t mean their ideas don’t have value. Many times 

they will be good for government and industry both, and we should be 

open to them. I would just make the point that a marketing pitch isn’t 

always the whole truth. As much as industry can be considered our partners or team members (I refer to the industrial base as part of our force 

structure, which in effect it is), at the end of the day industry has to make 

money to survive and shareholders rightfully hold defense firm management accountable for success as a business above all else. I would ask 

that you work closely with your acquisition professionals to ensure that 

your Service, and the DOD, present a consistent and stable set of positions to industry. 

Finally a word or two about my role in defense acquisition. I provide acquisition policy for the Department. Statute governs much of what we do, 

but within the limitations of statute I work with the SAEs to identify and 

promulgate best practices for the Department. That’s what every version of Better Buying Power has tried to do; not magic, but incremental 

improvement based on results as measured by data. I’m also very involved in the development of the acquisition workforce, which comprises 

approximately 150,000 people, mostly civilian. I provide some measure 
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Chapter Five: Responding to External Forces and Events

of leadership for that workforce, but this is a shared responsibility with 

Service chains of command. For those programs for which I am the MDA, 

I make the major milestone decisions which commit large sums of taxpayer funds to the next phase of the products life cycle. These decisions 

are based on Service plans which are presented for approval. In doing 

this I focus on the affordability and executability of the Service’s plan. I 

ask the basic questions about requirements firmness and clarity, technical feasibility, funding and schedule reasonableness, soundness of the 

contracting approach and incentives, test planning, and production and 

life cycle support planning needed to make the due diligence decision for 

the Department that the program has a reasonable chance of success. 

Program planning, management, and execution are Service responsibilities. If a program encounters serious problems, I work with the Service to 

determine the best corrective action. 

I’ve covered a lot of ground, much of it I hope is familiar to each of you. 

Some Service leadership has extensive experience in acquisition, but 

most uniformed leaders and many civilian leaders do not. It is a complex and challenging activity, one among many, which the DOD tries to 

accomplish for our country. I would be happy to discuss the content of 

this letter and any other acquisition related topic with you at any time. 

You also have a standing invitation to any meeting I might hold on any 

of your Service’s programs or acquisition activities, including Defense 

Acquisition Boards. We are united in our desire to improve acquisition 

outcomes, and I look forward to working more closely with you as we all 

do everything we can to improve the efficiency and effectiveness of all 

aspects of defense acquisition. 

Sincerely, 

Frank Kendall 

USD (AT&L) 
174 

Getting Defense Acquisition Right

When and When Not 


to Accelerate Acquisitions
 

Reprinted from Defense AT&L: November-December 2016 

Why don’t we do all our acquisition programs faster? What keeps us 

from having all acquisition programs be “rapid” acquisitions? The 

short answer is that, if we choose to, we can trade quality for time. 

Sometimes that is smart, and sometimes it isn’t. 

Often, and for good reasons, we demand high quality, and that takes more 

time. What I mean by “quality” in this case is the suite of features we want 

in the equipment intended for a large fraction of the force and that we keep 

in our inventory for a long time—30 or 40 years, in many cases. Quality 

includes high reliability, maintainability, operation in a range of climates 

and terrains, modularity and upgradability, well-designed user interfaces, 

cybersecurity, robustness against responsive threats, and effective training 

and logistics systems. None of these things is free, and they all take time to 

design for and test. 

For most so-called Programs of Record, we do take the time to design and 

build products of the quality desired by the customers, our operational 

communities. If you want something quick, it is generally going to be of 

lower quality—but that may be perfectly fine, depending on what you want. 

This is the operator’s call; the acquisition system responds to operator requirements. As acquisition professionals, we do want a two-way continuing discussion about requirements throughout the design and development 

process—and beyond. That conversation is necessary because design and 

development always involve a voyage of discovery. And because many desired design features have to be traded off against each other and against 

cost, those trade-offs should be operator/customer decisions, but should 

still be decisions informed by acquisition professionals. 

To do anything, we need money and a contract. There are vehicles that let 

us spend some money quickly, particularly for early stage prototypes, and 

there are some contract types that allow us to move out quickly, but they 

have limitations on scope, purpose, and amount we can spend. Lead time 

can be close to zero, or up to 2 years if we have to wait for a budget to be 

prepared, submitted and funded by Congress. We can work contracting 

activities (preparation of the request for proposal or even source selection) 

and milestone review processes (Defense Acquisition Board document 
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Chapter Five: Responding to External Forces and Events

preparation, as required) in parallel with the process of getting money— 

and usually we do so. If we already have the money, then some time is 

needed to have a contract. Again, for some limited purposes, this can be 

fast—but for major competitive awards this now takes about 18 months, 

close to the time it takes us to get funding from Congress. That’s twice the 

time it used to take a couple of decades ago, and one of the actions we are 

working is to reduce this lead time. 

If we just want a small number of prototypes for experimental purposes, 

and we only care about some key features and not the overall quality of the 

product, we can deliver in a matter of months or a few years, depending 

on how much new design work has to be done and the lead time for building small numbers of items or acquiring any needed subsystems from the 

manufacturers in the supply chain. If we want to try out a new kind of capability, to experiment, and don’t care about long-term ownership quality 

quality-related features, then rapid prototyping is the way to go. We can do 

this sort of thing fast, and the technical community loves to work on projects like this. However, some quality aspects such as safety must be dealt 

with when we work with energetics such as munitions and rocket propellants. We can do experimental prototyping without having a program of 

record, so no acquisition system bureaucracy overhead need be involved in 

an experimental prototype program. The product you will get from an experimental prototyping program is unlikely to be one you can just replicate 

and field in large numbers—it wasn’t designed for that. Sometimes we have 

liked the key features of experimental prototypes and just bought more of 

them. Because of their poor quality for long-term ownership and use, this 

has often been a disaster (see Global Hawk and the Exoatmospheric Kill 

Vehicle, as examples). 

Next up on the quality hierarchy are assembled items that focus on one or 

two key performance parameters that we do want in larger quantities, but 

where we are willing to sacrifice some aspects of quality in order to have 

an important operational capability fast, usually for operational reasons or 

maybe because we’ve been surprised by a threat. Think Mine-Resistant Ambush Protected (MRAP) vehicles, which were pulled together from existing 

automotive components. The goal was to get more protection to the field and 

to get it fast. MRAPs were a big success. We saved a lot of lives. MRAPs are 

relatively simple designs assembled from existing components and designed 

for low-end threats. They lack a lot of the features needed or desired by the 

Army, however, and almost all of the 30,000 or so we built are going out of 

the inventory now that the major counterinsurgency campaigns are over. 

Next on the quality scale are new designs that take into account all the 

things the customer wants. These are high quality products, and they take 
176 

Getting Defense Acquisition Right

longer, but that’s because we ask for more of them and have to do more 

work designing, building and testing. We want integrated designs that 

have many features desired by the customer (again requirements). Think 

of the Joint Light Tactical Vehicle (JLTV). The JLTV is a much higher quality product than any of the MRAPs. It will be in the Army inventory for 

decades, and most of the cost will be in maintenance and sustainment. The 

Army wants a highly reliable, maintainable design that will operate in a 

wide variety of terrain and in any climate. This is very different from what 

we did with MRAPs. JLTV is still a relatively simple design, but it has taken 

several years to mature the designs and pick a winner. For most of these 

systems, we do use the standard acquisition system milestones associated 

with decisions to start risk reduction (if needed), design for production and 

production itself. When the acquisition system’s set of milestone decisions 

is needed, we do this in parallel with the actual work so we don’t slow programs down. The decision process adds overhead, but it generally does not 

add time. 

Highest of all in terms of quality are systems like the F-35 fighter jet. These 

are designs that integrate the newest technology, have the highest possible 

performance, and that we count on for a significant, decades-long military 

advantage. We want quality features like high reliability, maintainability, 

upgradability for tech insertion, well-designed user interfaces, cybersecurity, anti-tamper, resilience against jamming and responsive threats, and 

a host of other things our operators understandably desire. These systems 

are the Formula 1 race cars that are going to win against the best there 

is and do so for years, not just for one racing season. They are not Chevies. These are our highest quality and most difficult products, but these 

are also the ones that often make the most difference in terms of technological superiority and operational dominance. They take several years in 

development, and often we need to do a risk-reduction technology maturation phase before we start designing for production. That adds 3 years or 

more if we build risk reduction prototypes before we start designing for 

production. For these systems, you do have to wait about 10 years, but they 

are what populates most of our force. Think F-18 combat jet, Aegis missile 

defense, DDG-51 destroyer, the Virginia SSN submarine, F-15 and F-22 

fighter jets, C-17 military transport aircraft, AMRAAM air-to-air missile, 

Abrams tank, Bradley fighting vehicle, Patriot missile, and Apache helicopter. Notably, every one of these high quality systems struggled to get 

through development and into production. Most were close to cancellation 

at some time in their development cycles. 

The acquisition system can produce experimental prototypes quickly, but if 

our customers want a high quality product that we will have in the inventory in large numbers for a lot of years, that takes longer. Many of the demon­
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Chapter Five: Responding to External Forces and Events

strations we have funded in the budget are experimental early prototypes. 

We are effectively buying options to do lower risk follow-on Engineering 

and Manufacturing Development phases leading to production. The ability to afford those follow-on programs, or even a subset of the concepts we 

will have demonstrated in the next few years, will be problematic. Unfortunately, the threats we are most worried about are not low-end threats—we 

are going to need high quality robust designs. 
178 
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Chapter Six 

Measuring Progress in 

Improving Acquisition 

“People only ask questions when they’re ready to hear the answers.” 

—John Irving 

As I write today, cost growth in the DoD’s most risky contracts is at a 30­

year low. This remarkable result has been achieved after several years of 

consistent management and continuous improvement efforts centered on 

the three versions of the Better Buying Power initiatives. Figure 4 provides 

the data that support this statement. 

Figure 4. Contract Cost Growth on Highest Risk 

(Major) Programs 

Contract Growth: Development and Early Production 

(scope growth + overruns; in dollars, after inflation) 

Better Buying Power 

Reagan Buildup 31-year average 

War on Terror 

1 

2 

3 

4 

5 

Post Goldwater-Nichols 

Reinventing Gov’t 

Transformation 

Total System Performance 

Responsibility (TSPR) 

FY1985 1990 1995 2000 2005 2010 2015 

10% 

8% 

6% 

4% 

2% 

0% 

SOURCE: AT&L (2016, p. xxviii). 

NOTE: This is a 5-year moving average of annual growth in development and early production contract costs for major DoD programs after inflation, including overruns and work 

added to the contracts. These data reflect 18,470 reports on 1,123 major contracts for 239 

major programs. 
180 

Getting Defense Acquisition Right

This chart and many others reflecting the DoD’s acquisition performance 

exist because of my decades of frustration with how we careened from one 

acquisition policy to another. One of my great frustrations has been the 

tendency to significantly change acquisition policy on 10- or 20-year cycles 

without ever determining first whether a policy was improving results or 

not. Developing new designs beyond the state-of-the-art weapons systems 

will never be free of risk, but there seems to be an expectation that all programs should execute perfectly on time and schedule. This doesn’t happen, 

of course, so we are often dissatisfied with results, leading to a political 

and management practice of more or less constant change. The occasional 

acquisition disaster further fuels this tendency. I believe firmly that we can 

analyze and understand the results we are achieving and identify the policies that work and those that do not. 

Several years ago, I formed a small cell of statistical analysts who have been 

dedicated to analyzing and reporting on the DoD’s acquisition performance. We have also used the work of others, such as think tanks and the 

Government Accountability Office, to further our understanding. Each of 

the last 4 years the DoD has published a compendium of the results of this 

analysis. As time has gone on, we have been able to identify policies that 

work and policies that have no or negative effect. This record now demonstrates quite clearly that the policies we have pursued are making a positive 

difference in our outcomes, particularly on controlling cost. Some of those 

results are provided here, but I refer you to the complete volumes for a 

much more complete set of data and a very rich discussion of the analysis 

the DoD has compiled.1 

In addition to being at a 30-year low, our cost performance improvements 

have not come at the expense of industry profitability. As noted earlier, 

profit is not optional for any business. Figure 5 summarizes the reported profit margins for the biggest defense contractors over the last several 

years. They have generally remained stable or even increased. 

1 Under Secretary of Defense for Acquisition, Technology, and Logistics. (2013). Performance of the Defense Acquisition System, 2013 annual report. Washington, DC: Department 

of Defense. http://www.dtic.mil/dtic/tr/fulltext/u2/a587235.pdf 

Under Secretary of Defense for Acquisition, Technology, and Logistics. (2014). Performance 

of the Defense Acquisition System, 2014 annual report. Washington, DC: Department of Defense. http://www.dtic.mil/dtic/tr/fulltext/u2/a603782.pdf 

Under Secretary of Defense for Acquisition, Technology, and Logistics. (2015). Performance 

of the Defense Acquisition System, 2015 annual report. Washington, DC: Department of Defense. http://www.dtic.mil/dtic/tr/fulltext/u2/a621941.pdf 

Under Secretary of Defense for Acquisition, Technology, and Logistics. (2016). Performance 

of the Defense Acquisition System, 2016 annual report. Washington, DC: Department of Defense. http://go.usa.gov/xkf4t 
181 

Chapter Six: Measuring Progress in Improving Acquisition

16% 

14% 

12% 

10% 

8% 

6% 

4% 

2% 

Underperforming acquisitions drove 

$2 billion writedown of goodwill 

Figure 5. Profits of the Six Largest DoD Primes 

18% Lockheed Martin 

Northrop Grumman 

Raytheon 

General Dynamics 

Boeing BDS 

BAE Systems 

Average 

0%
 

2010 2011 2012 2013 1024 2015
 

SOURCE: Company 10-K filings; AT&L (2016, p. xlviii). 

NOTES: Profits are corporate fiscal year earnings before interest, taxes, depreciation and 

amortization (EBITDA). 

Under Better Buying Power, in every version, the DoD has stressed the 

importance of managing cost by identifying and setting targets for cost 

reductions and working to obtain those savings. Figure 6 reflects the major 

increase in the percentage of the DoD’s programs that are achieving cost 

savings relative to their original baselines for both programs in development and programs in production. This is a dramatic improvement. 
Getting Defense Acquisition Right

Figure 6. Percent of Major Programs with Cost Reductions 

Development 

As of 2009: As of 2015: 100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 0% 

17% 

46% 

Better 

Upward 

Shift 

0% 

27% 

Better 

0% 

MS B MS B MS B MS B MS B MS B 1982–1993 1994–2002 2003–2009 1982–1999 2000–2008 2009–2015 (n=14) (n=44) (n=37) (n=23) (n=35) (n=13) 

Production 

As of 2009: As of 2015: 100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 0% 

23% 

8% 

39% 

Better 

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

24% 

47% 

Better 77%

Upward 

Shift 

MS B MS B MS B MS B MS B MS B 

1982–1993 1994–2002 2003–2009 1982–1999 2000–2008 2009–2015 

(n=13) (n=40) (n=33) (n=25) (n=36) (n=13) 

Significant positive shifts from 2009 to 2015 

SOURCE: AT&L (2016, p. xxvii). 

NOTE: Procurement funding growth is after adjusting for any quantity changes. The “n” 

gives the number of active programs in each time window. 

Unfortunately, the performance of the entire acquisition enterprise is often characterized based on one or two outlier programs that have incurred 

large and highly visible cost and schedule overruns; the F-35 fighter jet, 

a very atypical program, is a good example. Figure 7 shows that over the 

last several years the numbers of programs having large cost increases that 

trigger statutory review processes known as Nunn-McCurdy reviews have 

also decreased consistently. We have analyzed the root causes of these large 

cost growth events (Table 1), and many can be traced to poor decisions to 

accept excessive risk in development. 

182
 
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Chapter Six: Measuring Progress in Improving Acquisition

Figure 7. Major Programs Crossing Critical Congressional 

Cost-Growth Thresholds 

0 

1 

2 

3 

4 

5 

8 

6 

4 

2 

0 

Due to other issues 

Trend (other issues only) 

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
 

Due to quantity changes 

SOURCE: AT&L (2016, p. 25). 
Getting Defense Acquisition Right

Table 1. Root Causes for Major Programs Crossing Critical 

Congressional Cost-Growth Thresholds or Other Major 

Problems 

Fraction Count 

Inception 

Unrealistic baseline estimates for cost or 

schedule 29% 6 

Unrealistic performance expectations 

Immature technologies or excessive manufacturing or integration risk 

Other 

Execution 

Poor performance by government or contractor personnel responsible for program 

management 

• Systems engineering

10% 

10% 

10% 

2 

2 

2 

48% 10 

43% 9 

• Inadequate contract incentives 38% 8 

• Limited situational awareness

• Failure to act on information

Changes in procurement quantity 

Unanticipated design, engineering, manufacturing or technology integration issues arising during program performance 

Other 

Inadequate program funding or funding instability 

29% 

29% 

19% 

14% 

19% 

0% 

Total:

6 

6 

4 

3 

4 

0 

21 

SOURCE: AT&L (2016, p. 28). 

Together with the misimpression that the DoD has a large number of highcost-growth programs, there is also an impression that the acquisition system takes too long to develop and field new systems. Again, outliers like 

the F-35 are not representative of overall performance. Cycle time on major 

programs has, however, increased with complexity over the last few decades, but the average time from starting Engineering and Manufacturing 

Development (EMD) to Initial Operational Capability (IOC) over the last 

two decades averages about 7 years and is fairly stable (Figure 8). 

184
 
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Chapter Six: Measuring Progress in Improving Acquisition

Figure 8. Planned Length of Active Development Contracts 

for Major Programs 

Average (years) 

Average annual cycle time
 

(years)
 

7
 

6
 

5
 

4
 

3
 

2
 

1
 

0
 

1980 1985 1990 1995 2000 2005 2010 2015 

FY 

SOURCE: AT&L (2016, p. 60). 

For major information systems, the cycle time has decreased significantly 

at the median over the last few years (Figure 9). Also, we have been reducing schedule growth on individual contracts overall since 1985 (Figure 10). 
186 

Getting Defense Acquisition Right

Figure 9. Planned Major Information System Development 

Time 

Median (years) 

7 

6 

5 

4 

3 

2 

1 

0 

5.0 

3.2 

Started Before 2009 Started Since 2009 

(n=22) (n=19) 

SOURCE: AT&L (2016, p. xxxviii). 

Figure 10. Contract Schedule Growth on Highest Risk 

(Major) Programs 

Schedule Growth 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

Actual Model 

downward trend 

in time 

1985 1990 1995 2000 2005 2010 2015 

SOURCE: AT&L (2016, p. xxxviii). 
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Chapter Six: Measuring Progress in Improving Acquisition

As we try to understand the factors that affect the performance of the acquisition system we need to look beyond the obvious acquisition and contracting 

policies. One significant, compelling result was obtained by the Institute for 

Defense Analysis in a study of the relationship between budget climate (tight 

or decreasing versus loose/obliging or increasing) and future cost growth 

(Figure 11). This correlation is the strongest one we have identified to explain 

program cost growth. The data below show that, until now at least, acquisition policy has been much less important than budget climate in explaining 

cost growth in programs. This fact makes the results we are currently achieving during a period of tight budgets even more significant. 

Figure 11. Cost Growth on Highest Risk (Major) Programs 

Started in Different Budget Climates 

Median 

50% 

40% 

30% 

20% 

10% 

0% 

Budget: 

Acquisition 

Era: 

no Obliging 

comparison 

no Obliging 

comparison 

n/a n/a 

Obliging 

FY 1981­

1982 

Tight 

FY 1987­

1989 

Tight 

FY 1970­

1980 

Obliging 

FY 1983­

1986 

Tight 

FY 1990­

1993 

Obliging 

none 

Tight 

FY 1994­

2000 

Obliging 

none 

Tight 

FY 2001­

2002 

Obliging 

FY 2003­

2007 

DSARC Post-Carlucci DAB AR Post-AR 

29% 

23% 

28% 

40% 

50% 

9% 9% 

5% 

SOURCE: McNicol and Wu (2014); AT&L (2015, p. xxxiv). 

The first article in this section is a progress report on the Better Buying 

Power initiatives written in 2014, approximately 4 years after the first version of Better Buying Power was introduced and 2 years after version 2.0 

was implemented. The “core” initiatives that I believe should be in any version of Better Buying Power (under any label) are emphasized. These include the use of affordability caps, the requirement to use “should cost” 

management approaches, and the need for strong financial incentives 

tightly coupled to the government’s goals. Perhaps most important among 

these “core” initiatives are those designed to improve the professionalism 

of the government workforce. Whatever progress we have made over the 
188 

Getting Defense Acquisition Right

past several years is all due to the many actions across the vast defense acquisition workforce taken by our dedicated professionals as they go about 

the day-to-day business of extracting as much value as possible from every 

taxpayer’s dollar they are trusted to spend on behalf of our warfighters and 

our country. 

The second and final article in this section is the foreword to the fourth and 

most recent annual Report on the Performance of the Defense Acquisition 

System. This article summarizes some of the measurable results reflected in 

the annual report. 
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Chapter Six: Measuring Progress in Improving Acquisition

Better Buying Power—
 

A Progress Assessment
 

Reprinted from Defense AT&L: July-August 2014 

We are now four years since Dr. Carter and I began work on the first iteration of Better Buying Power, the label Dr. Carter gave to the original set of 

policies we promulgated as part of then Secretary Gates’ efficiency initiatives in 2010. In the intervening years, I’ve released the second iteration, 

or BBP 2.0 as it’s called, and I’ve also recently made some statements in 

public that BBP 3.0 may be on the horizon. Has all this made a difference? 

I believe it has, although I’m also certain that we have ample room for additional gains in productivity and other improved outcomes. Despite some 

comments I’ve made about BBP 3.0, the commitment to the enduring practices and policies from both the original BBP and BBP 2.0 remains. The 

whole concept of Better Buying Power is of a commitment to continuous 

incremental improvement; improvement based on experience, pragmatism 

and analysis of the evidence (i.e., the data). Four years on, as we to begin to 

consider the next steps we may decide to take, it’s a reasonable time to take 

a look at what we have done so far. 

When I introduced the second iteration of Better Buying Power, we had 

already made a number of adjustments (continuous evolutionary improvements) to the initiatives in the first iteration. Under 2.0, most of the BBP 1.0 

initiatives continued, either under the 2.0 label or just as good best practices 

we may not have emphasized under BBP 2.0. Where changes were made, this 

was clearly articulated in 2.0. For example, the overly restrictive guidance on 

fixed-price incentive contract type (never intended to be as proscriptive as it 

may have been interpreted to be) was changed to emphasize sound decision 

making about the best contract type to use in a given circumstance. We also 

relaxed the model constraints on time to recompete service contracts that 

proved too restrictive. In general, BBP 2.0 moved us in an incremental way 

from the set of model rules or best practices that tended to characterize BBP 

1.0, to a recognition that, in the complex world of defense acquisition, critical 

thinking by well informed and experienced acquisition professionals is the 

key to success—not one-size-fits-all rules. This is equally true of the acquisition of contracted services for maintenance, facility support, information 

technology, or anything else we acquire from industry, as it is for the various 

aspects of the large programs that we normally associate with defense acquisition. I won’t cover every initiative in BBP 2.0, but in general here’s where 
190 

Getting Defense Acquisition Right

I think we are in improving defense acquisition, and where I think we still 

need to go on these initiatives. 

Achieving Affordable Programs 

Over the past 4 years we have continuously increased the number of major 

programs with assigned affordability targets (Milestone A or before) or caps 

(Milestone B) as programs come through the milestone review process. I recently reviewed the status of compliance, and, in all but two or three cases, 

programs with caps have so far remained under their caps. The few that need 

to act immediately to reduce costs have estimates that are very close to their 

caps. I believe we have been successful in applying the caps. The affordability analysis process is also detailed in the new Department of Defense Instruction (DoDI) 5000.02, and in most cases this process is being followed 

by service programming communities who do the long-term budget analysis 

needed to derive caps on sustainment and production. For smaller programs 

that are a fraction of the considered capability portfolio, assigning a cap can 

be problematic, but it still needs to be done to instill discipline in the requirements process. Looking forward, the Department has a significant problem 

in the next decade affording certain portfolios—strategic deterrence, shipbuilding and tactical aircraft are examples. This situation will have to be addressed in the budget process, but I think we can say that we are making 

reasonable progress in the acquisition system in constraining program cost, 

especially for unit production cost, which is easier to control than sustainment. Nevertheless, we have challenges particularly in understanding longterm affordability caps outside the 5-year planning cycle, especially under a 

sequestration level budget scenario. 

Controlling Cost Throughout 

the Acquisition Life Cycle 

The implementation of “should-cost based management” is well under way, 

but work is still needed to instill this concept deeply in our culture and 

the way we do business. “Should cost” challenges every DoD manager of 

contracted work to identify opportunities for cost reduction, to set targets 

to achieve those reductions, and to work to achieve them. Managers at all 

levels should be taking and requiring that these steps be taken and rewarding successful realization of cost savings. I am seeing more and more of the 

desired behavior as time passes, but I am also still seeing cases where implementation seems to be more token than real. We also have work to do in 

understanding and teaching our managers the craft of doing “should cost” 

for our smaller programs (e.g., Acquisition Category IIIs, Services, etc.)— 

this remains a work in progress. Overall, “should cost,” as a single measure alone, if fully implemented, will cause fundamental change in how we 
191 

Chapter Six: Measuring Progress in Improving Acquisition

manage our funds. The letter the Under Secretary of Defense (Comptroller) 

and I signed 2 years ago laying out our expectations for major program 

obligation rate reviews is still operative; the job is not to spend the budget, 

it is to control costs while acquiring the desired product or service and to 

return any excess funds for higher-priority needs. The chain of command 

still has to learn how to support that behavior instead of punishing it. For 

major program “should cost” realization, the saved funds will continue to 

remain with the Service or Agency, preferably for use in the program or 

portfolio that achieved the savings. 

We are making progress at measuring and understanding the performance 

of the acquisition system. Last year I published the first edition of the Annual Report on the Performance of the Defense Acquisition System. The 

next report should be published at about the time that this article goes to 

press. Each year we will try to expand the data set with relevant information about all aspects of defense acquisition performance. We will also add 

analysis that will help us understand the root causes of good and poor results and that correlates the results we are seeing with our policies. We need 

to make decisions and track our performance via data and robust analysis, 

not anecdote or opinion. 

Further, it isn’t always easy to look in the mirror, and some government 

institutions or industry firms may not like what the report reveals, but the 

road to improvement has to begin with an understanding of where the 

problems lie. 

I believe we are also gaining ground with regard to cooperation between 

the requirements and acquisition communities. My own partnership with 

the Vice Chairman of the Joint Chiefs of Staff and the Joint Requirements 

Oversight Council is intended to set the example in this area. We meet 

frequently to discuss issues of mutual concern and to reinforce each other’s 

roles in the requirements and acquisition systems. The use of affordability 

caps and expanded use of Configuration Steering Boards or “provider forums” are also strengthening the linkage to the requirements communities. There is an ancient debate about which comes first, requirements or 

technology. The debate is silly; they must come together and it cannot be 

a one-time event in a program but continuous. Requirements that are not 

feasible or affordable are just so many words. A program that doesn’t meet 

the user’s needs is wasted money. 

The BBP 2.0 program to increase the use of defense exportability features 

in initial designs is still in the pilot stage. I believe this concept is sound, 

but the implementation is difficult because of some of the constraints on 

our budgeting, appropriations and contracting systems. Support for U.S. 

defense exports pays large dividends for national security (improved and 
192 

Getting Defense Acquisition Right

closer relationships), operationally (built-in interoperability and ease of cooperative training), financially (reduced U.S. cost through higher production rates), and industrially (strengthening our base). This initiative will 

continue on a pilot basis, but hopefully be expanded as the implementation 

issues are identified and worked out. 

Incentivize Productivity and Innovation 

in Industry and Government 

Our analysis of the data shows that we have more work to do in aligning 

profitability with performance. This year’s Annual Report on the Performance of the Acquisition System will provide the data. In most cases we 

get it right—good performance leads to higher profits, and poor performance leads to lower profits. In some cases, however, there is no discernable impact of performance on margins, and in a few cases profit actually 

moves in the opposite direction from performance. In addition to getting 

the correlation right, we also need to make the correlation stronger and to 

tie increased rewards to real accomplishments. We want win-win business 

deals, but we aren’t always obtaining them. 

In BBP 2.0, we modified the guidance from BBP 1.0 to focus attention on 

professional judgments about the appropriate contract type, as opposed to 

emphasizing one type over others. As we analyze the data on major programs, it shows that in general we get this right, particularly with regard to 

choices between fixed-price and cost-plus vehicles. We are still in the process of providing updated guidance in this area. One thing is clear from the 

data: Where fixed price is used, there is benefit to greater use of fixed-price 

incentive vehicles, especially in production contracts and even beyond the 

initial lots of production. We are increasing the use of fixed-price incentive 

contracts in early production—and it is paying off. 

We have begun to monetize the value of performance above threshold 

levels, however this practice is still in its early phases of implementation. 

Requirements communities usually express a “threshold” level of performance and a higher “objective” level of performance, without any indication of how much in monetary terms they value the high level of capability. 

It represents a difficult culture change for our operational communities to 

have to put a monetary value on the higher than minimum performance 

levels they would prefer—if the price were right. The Air Force Combat 

Rescue Helicopter was the first application of this practice now in the process of being applied more widely across the Department. Forcing Service 

requirements and budget decision makers to address the value they place 

on higher performance (which has nothing to do with the cost) is leading 

to better “best value” competitions where industry is well informed about 
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Chapter Six: Measuring Progress in Improving Acquisition

the Department’s willingness to pay for higher performance, innovation is 

encouraged and source selections can be more objective. 

One of the strongest industry inputs we received in formulating the BBP 

2.0 policies was that the “lowest price, technically acceptable” (known as 

LPTA) form of source selection was being misused and overused. We have 

provided revised policy guidance that, like other contracting techniques, 

LPTA should be used with professional judgment about its applicability. 

This technique works well when only minimal performance is desired and 

contracted services or products are objectively defined. LPTA does simplify source selection, but it also limits the government’s ability to acquire 

higher quality performance. I believe we have been successful in reducing 

the use of LPTA in cases where it isn’t appropriate, but we are open to continued feedback from industry on this. 

Instituting a superior supplier incentive program that would recognize and 

reward the relative performance levels of our suppliers was a BBP 1.0 initiative that we have had great difficulty implementing. I’m happy to report 

that the Navy pilot program has completed the evaluation of the Navy’s 

top 25 contracted service and product suppliers. The evaluation used the 

Contractor Performance Assessment Rating System (or CPARS) data as its 

basis. Major business units within corporations were assessed separately. 

The Navy is providing results divided into top, middle and lower thirds. 

Business units or firms in the top third will be invited to propose ways to 

reduce unneeded administrative and overhead burdens. The Superior Supplier Program will be expanded DoD-wide over the next year. We expect 

this program to provide a strong incentive to industry to improve performance and tangible benefits to our highest performing suppliers. Finally, 

we expect to build on this Navy pilot and expand it to the other Services. 

BBP 2.0 encouraged the increased use of Performance Based Logistics 

(PBL) contract vehicles. These vehicles reward companies for providing 

higher levels of reliability and availability to our warfighters. If the business deal is well written and properly executed, then PBL does provide cost 

savings and better results. The data shows that we have not been able to 

expand the use of PBL for the last 2 years and that prior to that the use 

was declining. Declining budgets as well as the budget uncertainty itself, 

and therefore contract opportunities, are part of this story, as is the fact 

the PBL arrangements are harder to structure and enforce than more traditional approaches. Those factors, combined with the imposition of sequestration, furloughs and a government shutdown last year are likely to 

have suppressed the increased use of PBL. This area will receive additional 

management attention going forward; we are going to increase the use of 

this business approach. 
194 

Getting Defense Acquisition Right

Another major input to BBP 2.0 received from industry concerned the 

large audit backlog with the Defense Contract Audit Agency (DCAA). The 

backlogs both delay contract close-out payments and extend the time before new awards can occur. Pat Fitzgerald, the DCAA Director, has worked 

very closely with the acquisition community to address this. Pat is a regular participant in the monthly Business Senior Integration Group meetings 

that I chair to manage BBP implementation. Under Pat’s leadership, DCAA 

is well on the way to eliminating most of the incurred cost audit backlog 

and expects to effectively eliminate the areas with the most excessive backlog over the next year. This is being accomplished despite all the workforce 

issues the Department has been forced to deal with. 

Strengthening discretionary research and development by industry was an 

early BBP initiative. I am concerned that industry is cutting back on internal research and development as defense budgets shrink. This is an area 

we have tried to strengthen under BBP. We have made good progress in 

providing an online forum for industry to understand the Department’s 

technology needs and internal investments, and for industry to provide 

research and development results to government customers. If company 

R&D isn’t being conducted, then these steps certainly can’t substitute for 

doing the actual research. We will be tracking these investments carefully 

going forward, and I will be working with defense company chief executives and chief technology officers to review their investment plans. The 

wisest course for industry is to continue adequate investments in R&D so 

as to be positioned for the inevitable future increase in defense budgets. 

Now is the time for all of us to invest in research and development. This 

requires discipline and commitment to the long-term as opposed to shortterm performance, however. Most of the chief executives I have discussed 

this with share this perspective; they recognize that the Department needs 

industry partners who are in this for the long term with the Department. 

Eliminate Unproductive Processes 

and Bureaucracy

 I would like to be able to report more success in this regard, but I am finding that bureaucratic tendencies tend to grow and to generate products for 

use within the bureaucracy itself, together with the fact that the comfortable habits of years and even decades are hard to break. This is all even 

truer, in my opinion, within the Services than it is within the Office of 

the Secretary of Defense (OSD). On the plus side, however, we are making 

progress and I have no intention of stopping this effort. 

I have taken steps to reduce the frequency of reviews, particularly reviews at lower staff levels. Whenever possible we are combining OSD 
195 

Chapter Six: Measuring Progress in Improving Acquisition

and Service reviews or using senior-level in-depth reviews without preceding staff reviews and briefings. I have also instituted an annual consideration of major programs for delegation to the Services for management. Where the program risk has been significantly mitigated and/or all 

major Department investment commitments have already been made, I 

am delegating programs for Service oversight. I am also looking for opportunities to conduct pilot “skunk works” type oversight of programs 

which will, among other features, substitute in-depth but short on-scene 

reviews for the numerous formal documents with attendant staffing process that are normally required to support milestone decisions. I have 

also set firm and short time spans for staff review of some key documents 

so that issues are identified quickly and elevated rather than debated endlessly at the staff level. 

Our efforts to increase the role and primacy of the acquisition chain 

of command are also making progress, but have additional room for 

improvement. A full-day workshop the Service Acquisition Executives 

(SAEs) and I recently conducted with all the Department’s Program 

Executive Officers (PEOs) was very effective in communicating our 

priorities and in obtaining feedback on Better Buying Power and other 

initiatives. That feedback will be very helpful as we adjust our policies 

going forward. I also recently conducted a half-day workshop with our 

PEOs and program managers who manage and direct the Department’s 

business systems. This is an area where I feel strongly that we can reduce some of the burdensome overhead and bureaucracy associated 

with these programs. I will need the support of the Congress to achieve 

this, however. 

Time is money, and reducing cycle time, particularly long development 

times and extended inefficient production runs would improve the Department’s productivity. I have reviewed the data on development timelines and they have increased, but not on average by outrageous amounts; 

the average increase in major program development time over the last few 

decades is about 9 months. Much of this increase seems to be driven by 

longer testing cycles, brought on by the growth in the number of requirements that have to be verified, and by the increased complexity and size, 

and therefore development time, of the software components of our programs. We are still collecting data and analyzing root causes of cycle time 

trends, but the most debilitating one is obvious: Budget cuts in general 

and sequestration cuts in particular are forcing the Department to adopt 

low production rates, in some cases below the theoretical minimum sustaining rate. Lowering production rates is stretching out our production 

cycle time and raising unit costs almost across the board. 
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Getting Defense Acquisition Right

Promote Effective Competition 

Competition works. It works better than anything else to reduce and 

control costs. Unfortunately, the current data shows that the Department is 

losing ground in the percentage of contracted work being let competitively 

each year. The erosion is not huge, and I believe that decreasing budgets, 

which limit new competitive opportunities, are a major root cause. The Air 

Force launch program provides an example; we were moving aggressively 

toward introducing competition when budget cuts forced the deferral of 

about half the launches scheduled for competition. This is an area that I 

will be tracking closely and managing with the SAEs and agency heads in 

the coming months to try to reverse the recent trend. 

Under BBP, we have recognized that for defense programs, head-to-head 

competition isn’t always viable, so we are emphasizing other steps or measures that can be taken to create and maintain what we call “competitive 

environments.” Simply put, I want every defense contractor to be worried 

that a competitor may take his work for DoD away at some point in the 

future. As I review programs, I ask each program manager and PEO to 

identify the steps they are taking to ensure the existence of a competitive 

environment for the efforts they are leading. 

Open systems provide one opportunity to maintain competition below the 

prime level and to create a competitive environment for any future modifications or upgrades. Open systems and government “breakout” of components or subsystems for direct purchase are not necessarily in the interest 

of our primes, so careful management of interfaces and associated intellectual property, especially technical data rights, is key to achieving competition below the prime level and for future upgrades. Industry has a right to a 

fair price for intellectual property it has developed, but the government has 

many inherent rights and can consider the intellectual property implications of offerings in source selection. Our principal effort in this area has 

been to educate and train our workforce about how to manage this complex 

area. This is an effort that will bear fruit over time and in which I believe 

reasonable progress is being made. As we mature our practice in this area, 

we need to also guard against overreaching; industry cannot be forced or 

intimidated into surrendering valid property rights, but the government 

has to exercise its rights and protect its interests at the same time as it respects industry’s. 

Further, we in the government must have strong technical and programmatic capabilities to effectively implement open systems. The Long Range Strike 

Bomber program is applying modular open systems effectively in its acquisition strategy and provides a good example of how this balanced approach 

can work—again, if there is strong technical leadership by the government. 
197 

Chapter Six: Measuring Progress in Improving Acquisition

Small businesses provide an excellent source of competition. Due in no small 

part to the strong leadership of the Department’s Office of Small Business 

Programs Director, Andre Gudger, we have made great progress over the last 

few years. We have improved our market research so that small business opportunities are identified and we have conducted numerous outreach events 

to enable small businesses to work more effectively with the Department. 

While much of our effort has been directed toward increasing the amount of 

Department work placed with small businesses, this has been done with the 

recognition that work allocated to small businesses will be provided through 

competition, and competition that involves firms without the overhead 

burdens of our large primes. At this time, the trends in our small business 

awards are positive, despite the difficulties of the last few years, and I have 

strong expectations for our performance this fiscal year. 

The Department continues to emphasize competitive risk-reduction prototypes—when the business case supports it. This best practice isn’t called 

for in every program; the risk profile and cost determine the advisability 

of paying for competitive system-level prototypes. The available data shows 

that when we do acquire competitive risk-reduction prototypes we have to 

work harder on the government side to ensure that the relevant risk associated with the actual product we will acquire and field is really reduced. BBP 

2.0 reinforces this maxim, and I believe we have been correctly applying it 

over the last few years. This is one of many areas where simply “checking the 

box” of a favored acquisition technique is not adequate; real understanding 

of the technical risk and how it can best be mitigated is necessary. It is also 

necessary to understand industry’s perspective on these prototypes; industry cares much more about winning the next contract than it does about 

reducing the risk in the product that will be developed or produced under 

that contract. Competitive prototypes are successful when government acquisition professionals ensure that winning and reducing risk are aligned. 

The data show that in many past cases they were not aligned. 

Improve Tradecraft in Acquisition of Services 

We have increased the level of management attention focused on acquisition of services under both BBP 1.0 and 2.0. I still see this as the greatest 

opportunity for productivity improvement and cost reduction available to 

the Department. I have assigned my Principal Deputy, Alan Estevez, to 

lead the Department’s initiatives in this area. He is working with the Senior 

Service Acquisition Managers that we established under BBP 1.0 in each 

of the Military Departments. We have also now assigned senior managers 

in OSD and in each of the Military Departments for all of the several major categories in which we contract for services: knowledge-based services, 

research and development, facilities services, electronics and communica­
198 

Getting Defense Acquisition Right

tion, equipment-related services, medical, construction, logistics management and transportation. 

Our business policy and practices for services are improving. A counterpart to the often revised DoD Instruction for Programs, DoDI 5000.02, has 

been completed in draft and will soon be implemented. We have begun the 

process of creating productivity metrics for each of the service categories 

and in some cases for sub-areas where the categories are broad and diverse. 

We are also continuing efforts begun under BBP 1.0 to improve our ability 

to conduct effective competition for services, including more clearly defined requirements for services and the prevention of requirements creep 

that expands and extends the scope of existing contracts when competition 

would be more appropriate. Services contracting is also an area in which 

we are focusing our small business efforts. 

Services are often acquired outside the “normal” acquisition chain by people who are not primarily acquisition specialists—they are often acquired 

locally in a distributed fashion across the entire DoD enterprise. Services 

are also often paid for with Operation and Maintenance (O&M) funds 

where specific efforts have much less visibility and therefore less oversight. 

The results achieved as a result of acquisition practices for service procurements are often not as evident to management, nor as well publicized as the 

results for weapon system. We are working to correct this by strengthening 

our business management (not just contract management) in these areas 

and to identify and encourage best practices, such as requirements review 

boards and the use of tripwires. 

In summary, I believe that we have made a good start at addressing the potential improvements that are possible in contracted services, but we have 

more opportunity in this area than in any other. 

Improve the Professionalism 

of the Total Acquisition Workforce 

The total acquisition workforce includes people who work in all aspects of 

acquisition; program management, engineering, test and evaluation, contracting and contract management, logistics, quality assurance, auditing 

and many other specialties. All of these fields require high degrees of professionalism. I’m proud of our workforce; it is highly professional, but there 

isn’t a single person in the workforce, including me, who can’t improve his 

or her professional abilities. 

The addition of this major category in BBP 2.0 was the most significant 

adjustment to BBP 1.0. The specific initiatives included several measures 

to enhance our professionalism. Under the Defense Acquisition Workforce 
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Improvement Act, the Department created three levels of acquisition proficiency. I don’t believe that the standards for these levels as currently defined or implemented are adequate for the key leader acquisition positions 

that carry our highest levels of responsibility. We are in the process of creating and implementing higher standards for these positions. That process 

should conclude within the next year. As part of this initiative, we are conducting a pilot program to establish professional qualification boards. The 

pilot is being conducted by the Developmental Test and Evaluation community under the leadership of the Deputy Assistant Secretary of Defense 

for Developmental Test and Evaluation, David Brown. 

These boards will help to establish a culture of excellence in our acquisition career fields and DoD-wide standards for our key leaders. We are also 

taking steps to better define the qualification requirements for all our acquisition specialties. These qualifications will rely more heavily on specific 

hands-on work experience than we have in the past. Finally, we have taken 

steps to more fully recognize and reward our top performers. At my level, 

this includes spot awards as well as our standard periodic awards. We are 

making a particular effort to recognize the contributions of teams as well 

as individuals and to recognize exceptional performance in the full range 

of defense acquisition activities. 

People matter. If there is one legacy I would like to leave behind it is a stronger and more professional Defense Acquisition Workforce than the one I 

inherited from my predecessors. The tide would seem to be against me because of events like pay freezes, sequestration, furloughs, shutdowns and 

workforce reductions—all brought about by the current budget climate. 

However, if there is one thing that has impressed me during my 40-plus 

years in defense acquisition, most of it in government, it is the dedication, 

positive attitude, resilience and desire to serve the taxpayer and our Servicemen and -women well that characterizes this country’s acquisition professionals. Neither the public, nor everyone in Congress, nor even all of our 

operational communities seems to fully appreciate the nation’s acquisition 

workforce. This country owes a lot to you; together with our industry partners, you are the reason we have the best-equipped military in the world. I 

think that’s a good note to close on. Thanks for all that you do. 
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Getting Defense Acquisition Right

Foreword to the 2016 Report 

Reprinted from the Fourth Annual Report on the Performance of the 

Defense Acquisition System, October. 24, 2016 

Eliminate all other factors, and the one which remains must be the truth. 

—Sir Arthur Conan Doyle in “The Sign of the Four” 

As this report is being published, I am concluding 5 years of serving as 

the Under Secretary of Defense for Acquisition, Logistics, and Technology. This fourth report in the series continues my long-term effort to bring 

data-driven decision making to acquisition policy. This report demonstrates 

that the Department of Defense (DoD) is making continuing progress in 

improving acquisition. The overall series presents strong evidence that the 

DoD has moved—and is moving—in the right direction with regard to the 

cost, schedule, and quality of the products we deliver. There is, of course, 

much more that can be done to improve defense acquisition, but with the 

5-year moving average of cost growth on our largest and highest-risk programs at a 30-year low, it is hard to argue that we are not moving in the 

right direction. 

Each year we add cumulative data and new analysis to the report. This year 

is no exception. While that data can show us ways and places to improve, I 

believe there is no secret to what it takes to achieve good results in defense 

acquisition. The short form of this is to: (1) set reasonable requirements, (2) 

put professionals in charge, (3) give them the resources that they need, and 

(4) provide strong incentives for success. Unfortunately, there is a world of 

complexity and difficulty in each of these four items. 

Creating new—and sometimes well beyond the current state of the art— 

weapons systems that will give our warfighters a decisive operational 

advantage far into the future will never be a low-risk endeavor. That risk 

can be managed, however, and while we should not expect perfection, we 

should be able to keep the inevitable problems that will arise within reasonable bounds. We should also be able to continuously improve our performance as we learn from our experience and work to improve our ability 

to make sound acquisition decisions. This volume and its predecessors are 

dedicated to these propositions. 

We open this volume with some accrued insights and an attempt to refute 

some popular myths about defense acquisition. Too much of our decision 
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making on acquisition policy has been based on cyclical and intuitive conventional wisdom and on anecdote—or just the desire, spurred by frustration, to affect change. As I’ve worked in this field for more than four 

decades, it has become clear to me that there is no “acquisition magic”—no 

easy solution or set of solutions that will miraculously change our results. 

Most attempts to direct or legislate acquisition “magic” in some form have 

been counterproductive and often only increased the system’s bureaucracy 

and rigidity or led to excessive risk taking—neither of which is helpful. 

What we need, and always will need, is professionalism, hard work, attention to detail, and flexible policies and incentives that the data show 

align with the results we desire. Improving each of these is a continuous 

endeavor of which this volume is a part. 
202 

Getting Defense Acquisition Right
203 

Conclusion
 

“Any fool can make a rule and every fool will mind it.” 

—Henry David Thoreau 

I would like to end this anthology where I began Chapter 1, with the simplest formulation of how to get defense acquisition right that I’ve been able 

to conceive: 

• Set reasonable requirements. 

• Put professionals in charge. 

• Give them the resources they need. 

• Provide strong incentives for success. 

If we can find a way to do these four things, we will have done almost all 

that is possible at the senior management level. 

The first of these, setting reasonable requirements, is a job for military operational customers working in very close cooperation with acquisition 

professionals. Requirements should include not just performance, but also 

cost, urgency, and desired features. They should include well-defined priorities and, when possible, monetized value judgments to guide trade-offs 

and inform industry. Requirements maturation and the cooperation between operational and acquisition communities should occur over the life 

cycle of the product, but be particularly strong during the early stages of 

development when all the major decisions that will drive the design of a 

new product are made. 

The second applies to the government acquisition workforce particularly, 

and to all the leaders that influence that institution. Defense acquisition 

is managed by a collection of professions. If you want a champion sports 

team or a first-in-class organization of any type, you recruit the best and 

you develop talent. The entire acquisition chain of command and each key 

acquisition leader in all of the dozen or so acquisition professions should 

be qualified, trained, and experienced professionals. This includes the Defense Acquisition Executive and the Service or Component Acquisition Executives. Building this professional workforce is a job for everyone who can 

affect the result, by action or inaction. This includes Congress, the leadership of the Department and the Services, and everyone in the chains of 

command of the people comprising the defense acquisition workforce. It 

starts with appreciating the challenges the workforce must overcome and 
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the great difficulties they face in doing so, and it includes a host of measures 

that can be taken to strengthen that workforce. 

The second point also addresses the authority that should be granted to 

those professionals. Put them in charge, let them do their jobs, and hold 

them accountable for the results, but be realistic about expectations. Frankly, the DoD’s acquisition professionals get far too much direction in how to 

do their jobs from people and institutions who know next to nothing about 

what it takes to develop and deliver a new product. Washington seems to 

be full of people with theories about how to “reform” acquisition, and no 

experience whatsoever in actually delivering products. Along those lines, 

one risk of the move to increase Service Chiefs’ and Secretaries’ involvement in acquisition is just this. Almost without exception Service Chiefs 

have no experience or training in acquisition, in developing and delivering 

a new cutting-edge design. Also, the most recent version of the NDAA, the 

2017 bill that recently became law, contains incredibly detailed language on 

newly devised acquisition approaches that seem to be totally divorced from 

the reality of new product development and all the painful lessons of earlier 

statutory or management experiments. One cannot manage acquisition by 

remote control, and statutory constraints are just that, constraints that get 

in the way of sound situation-based decision making by professionals. I 

would ask Congress to stop telling the Department’s acquisition professionals how to do their jobs. Give them the flexibility they need to be successful, and then hold them accountable for the decisions they make, even 

if there is a delay of several years, as there often is, from the decision to its 

consequences becoming apparent. I, for one, am fully prepared to testify 

someday on the decisions I made as USD(AT&L). I’m sure I made mistakes, 

and if the Department can learn from those mistakes so as not to repeat 

them, I fully support that process. 

The third applies to all the resources needed for success, but especially 

time and money. Programs that begin with unrealistic schedules and inadequate funding are headed for failure from day one. The major risk I 

see in the trifecta of the current enthusiasm for “rapid acquisition,” combined with a climate of tight budgets and the delegation of more authority 

to the military Services, who are always motivated toward optimism, is 

that we will set programs up for failure, as we often have in the past. The 

Under Secretary for Acquisition was established to address precisely this 

issue. I worked on the Army’s Future Combat Systems in industry (at least 

$10 billion and nothing delivered to the warfighter), and I was involved in 

oversight of the A-12 combat reconnaissance aircraft fiasco in government 

(several billion spent, nothing delivered to the warfighter, and a 20-year 

lawsuit). I know what this looks like, and I hope we have learned not to 

repeat these experiences, but I’m skeptical. 
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The last point, “provide strong incentives for success,” is trickier than it 

sounds. Its application to industry is relatively clear, but not always straightforward or easy. Industry responds to financial incentives, but that is not 

the end of the story. Aligning those incentives so that they work effectively 

and consistently with the government’s goals can be a delicate balancing 

act. I have stressed this aspect of acquisition planning, and the data reflect 

that we have made progress. It’s important for government people, acquisition and otherwise, to realize that industry is motivated, first and foremost, 

to win contracts. After that they are strongly motivated to make money on 

those contracts. Both motivations are important, and both can lead to behavior that is or isn’t in the warfighter and the taxpayer’s interests. 

Incentives within government are more subtle and diverse. They include 

organizational and personal rewards that are generally not monetary, and 

they include positive and negative incentives (carrots and sticks). One feature of those incentives is that they are rather limited in both directions. 

Providing more incentives for the behaviors we want by our government 

team is a leadership challenge that I and many other leaders throughout 

the acquisition chains of command work on constantly. We need the help 

of other leaders in and out of DoD. I cringe whenever I hear an operational 

leader complain about the acquisition community’s perceived shortcomings, or a congressman reflect negatively on the government workforce. 

Both are strong disincentives for bright young people to join or stay in the 

field of government defense acquisition. 

As I was rolling out one of the versions of Better Buying Power at a Washington, DC think tank, someone asked me what grade I would give the 

defense acquisition system. My answer was a B+ or maybe an A-. If the 

defense acquisition enterprise, industry and government combined, were 

a professional sports team, in football say, we’d be the repeat Super Bowl 

winners year after year. In fact we’d win almost all of our games. We’d also 

have a fumble, or drop a pass, or miss a tackle once in a while. More directly 

we deliver almost all of the products we set out to build, even the most difficult and advanced products. We have fewer overruns and schedule slips 

than many commercial product developers, and we easily outperform the 

cost and schedule performance of large public works projects. Even as criticized a program as the F-35, which was very much an outlier in many ways, 

is delivering a best-in-the-world product that will anchor our dominance 

in the air for years to come. 

I close with one more article, the last I expect to publish for the DoD acquisition workforce as USD(AT&L). It is a collection of anecdotes or stories 

drawn from over my career. I believe in the use of data to drive acquisition policy, but like everyone else I’ve been influenced by my experiences. 
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As human beings, we learn well from the stories we hear or read as well 

as from the ones we live. I think I learned something from each of these 

experiences, and I hope that others may find something useful somewhere 

in them also. 

This isn’t a broken system that needs radical overhaul. It does need to be 

improved, and it can be. I believe, and the data support, that we have made 

significant improvements over the past several years, but there is more 

work to be done. We do have too much bureaucracy, and we do need to 

tailor and streamline our programs more. We can improve in almost every 

facet of acquisition, but that improvement is going to come from the hard 

work and professionalism of the people in the ring—industry and government—fighting every day to deliver high quality products to our warfighters. Those people deserve our respect and gratitude. 
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Adventures in Defense Acquisition 

Reprinted from Defense AT&L: January-February 2017 

For what is likely to be my last communication to the acquisition workforce 

as Under Secretary of Defense for Acquisition, Technology, and Logistics 

(USD[AT&L]), I thought I would share with you a few stories, all true, from 

my 45 or so years working in various aspects of defense acquisition, either 

in uniform, as a civil servant, in industry, or as an appointee. I’ve put them 

more or less in chronological order, starting with an experience I had while 

serving in Europe during the height of the Cold War. There has certainly 

been a lot of water under the bridge since then, and a lot has changed, but 

the things I’ve learned along the way are in many cases timeless. 

During the 1970s, as an Army captain, I commanded a Hawk air defense 

battery in West Germany. We had a new battalion commander take over 

during that time. He immediately started a program he called “Victory 

Through Integrity” or VTI. This was the period of the readiness crisis and 

the “hollow force” following the end of the war in Vietnam. 

Our new commander’s ideas on logistics included that cross-leveling parts 

between units and cannibalizing down items of equipment, like our radars, 

was a violation of our integrity. We stopped doing these things and went 

nonoperational for several months while we stubbornly stuck to our “principles” about these maintenance policies. During that period, training as 

well as operational readiness suffered enormously. Eventually, the battalion 

commander was told to change his policies. He very reluctantly obeyed the 

order. I believe it is always important to act in a principled way, and in particular to act with integrity, but in this case I felt that my commander had 

confused integrity with reasonable choices in management policy. Leaders 

will always have initiatives and labels to describe them (e.g., Better Buying Power), but when they represent management choices they should be 

viewed as just that—choices that can be reversed or changed based on new 

information (data) about how well they are working, or not. 

In 1980, while still an Army captain, I attended my first congressional 

hearing. I believe it was the House Armed Services Committee. I was 

there in support of my boss at the time, the Army major general who was 

the Army’s Ballistic Missile Defense program manager. He was one in a 

series of program managers providing testimony that day. This was about 

3 years before President Reagan announced the Strategic Defense Initiative (SDI) program. 
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One of my most vivid memories of that hearing was the lead professional 

staff member for the committee holding up a schedule and chastising a witness for the degree of concurrency in his program. What I can’t remember 

is whether he was for or against concurrency—but, whichever it was, he was 

passionate about it. We’ve been for and against concurrency several times 

since that hearing. Like many other decisions, the degree of concurrency 

(overlap between development and production) in a program is a judgment 

call motivated by many factors, first among them being confidence in the 

stability of the design. Early in my tenure as USD(AT&L), I referred to the 

extraordinary amount of concurrency, and the specific decision to start 

production on the F-35 fighter jet before any flight test data had been accumulated, as “acquisition malpractice.” The press loves pithy expressions 

like this, so the comment got a lot of exposure. Concurrency decisions, like 

many others in acquisition, require critical thinking, sound professional 

judgment and taking a lot of program specific factors into account. 

Careers can take strange turns. One of mine may have hinged on a 2 a.m. 

flight from Andrews Air Force Base in Maryland to Nantucket Island in 

Massachusetts. I was the Assistant Deputy Director of Defense Research 

and Engineering for Strategic Defense programs. My boss’ boss’ boss, the 

Under Secretary for Acquisition, was on vacation in Nantucket and was 

tasked on short notice to come back to Washington for a hearing on the 

SDI. I volunteered to fly to Nantucket on the MILAIR flight that would 

bring him back to DC and to prep him during the flight for the hearing, 

which would be held the same day. We picked him up at about 5 a.m. Nobody had told him I would be on the airplane, so he was a little surprised to 

see me. He was also pretty impressed that I had gone the extra mile to stay 

up all night so I could brief him. I accompanied him to the hearing, which 

went very well, in part because I had a chance to prep him thoroughly. Just 

after that, I applied to be the acting Director of Tactical Warfare Programs 

when the incumbent left government. This job, overseeing all of the Department of Defense (DoD) conventional weapons system programs and 

reporting directly to the Under Secretary, was my dream job at the time. I 

got the job. 

While I was still the acting Director for Tactical Warfare Program, a period 

of 2.5 years when I didn’t know if a political appointee would replace me, 

there were four changes in the officeholder of Under Secretary of Defense 

for Acquisition. One of these was a former executive from Ford who was totally new to Washington and DoD and who had just come onboard. At the 

time, we were struggling to get the Advanced Medium-Range Air-to-Air 

Missile program (AMRAAM) through testing and into production. Late 

on a Friday afternoon, I received a preliminary report from the Air Force 

that we had experienced a flight test failure. There was very little informa­
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tion on what had happened, so I decided to wait until I knew more before 

informing the Under Secretary. On Monday morning, I was at Patuxent 

River Naval Air Station in Maryland, getting a medical so I could do an 

F-18 flight out to a carrier. A perk of my position was that there were often 

good reasons for me to experience firsthand the performance of our conventional weapons programs. 

Just as the flight physician was about to take my blood pressure, I received 

a call from the Under Secretary. The press had heard about the flight test 

failure and had asked the Secretary of Defense about it. He was clueless 

so he asked the Under Secretary, who was also clueless because I hadn’t 

informed him yet. When asked, the Air Force was understandably quick to 

point out that I had been informed right after the failure. The Under Secretary proceeded to rip me a new one, as they say. As soon as I got off the 

phone, the flight physician took my blood pressure. Eventually I did get to 

experience the F-18 flight, and eventually the “acting” status was removed 

from my title, but it took some time to recover from that initial impression. 

Nobody likes surprises, and the more senior one is the less one likes them. 

Bad news does not improve with age. 

In addition to having problems completing flight test, the AMRAAM 

struggled for at least a year to demonstrate that it could meet one specific 

reliability requirement, the average number of hours it could be carried on 

an aircraft before a failure occurred. The requirement had been set arbitrarily at 450 hours. This was a totally unrealistic number that later analysis showed had no operational value or cost effectiveness. The requirement 

could have been dropped to 250 with minimal cost or operational impact. 

So why did we spend more than a year making holes in the sky to prove we 

could achieve 450 hours? Because we had failed operational testing and it 

had politically become a high-interest item. The program had a bad reputation and was at real risk of cancellation. The Services concluded that it 

was better to keep flying to try to achieve the requirement than to take the 

political risk associated with reducing it; so we kept flying. In those days, 

requirements were often set by relatively junior people with a high degree 

of arbitrariness. The missile AMRAAM was replacing had a mean time 

between failures of 200 flight hours. So what was a good number for the 

replacement? How about 450 hours? Seemed reasonable. Acquisition and 

operational people have to work in close cooperation. If you don’t, this is 

the sort of thing that happens. 

One of my programs in DoD was a special access Navy program to develop 

the A-12 stealthy fighter bomber. It had already started Engineering and 

Manufacturing Development when it fell under my portfolio. It was also 

touted as a new model for how to do acquisition effectively at the time— 
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little oversight, firm fixed-price development, an acquisition approach that 

in the development phase teamed two competitors who would later compete for production, and a very aggressive schedule tied to fixed-price production options. It was a disaster waiting to happen. The A-12 is taught as a 

classic case study in how not to do acquisition, and for good reasons. 

We have a lot of programs that struggle to get through development and into 

production, but most of them do get there. Programs like the A-12, where 

we spend billions of dollars and get nothing, are travesties. I won’t try to tell 

this whole story here; it is available elsewhere in great detail. At that time, the 

Secretary of Defense was Dick Cheney, and we were doing something called 

“The Major Aircraft Review.” In one of my briefings to Secretary Cheney, I 

had told him that based on earned value data (but not what the contractor 

or military Service were saying) the program was in big trouble, and would 

overrun by at least a year and $1 billion. I found that out from the DoD 

Earned Value Management guru at the time, Gary Christle. 

After the A-12 blew up, figuratively speaking, and was canceled (properly so, as the Supreme Court finally concluded about 20 years later) there 

was an investigation, led by a general officer, into who knew what when. It 

turned out that John had briefed a member of my staff several weeks earlier, 

but no one had informed me. The data provided compelling evidence of 

where the program was headed. That member of my staff who had been 

briefed was a very capable Navy officer. However, instead of informing me 

of the data, he had immediately called the Navy staff to warn them about 

this threat to the Navy’s program in the Office of the Secretary of Defense. I 

was rather upset when I found out he hadn’t seen any reason to inform me, 

the person he was supposed to be working for. During the investigation, I 

brought this up, and in the report that followed I was criticized for not having adequately trained this officer in the fact that he had a duty to inform 

me, his supervisor, of any relevant information about the program he was 

overseeing for me. I’m not making this up. Service loyalties run deep. 

The A-12 cancellation came about in part because the Secretary of Defense 

had testified that the program was progressing more or less on track. I don’t 

know for a fact, but my guess is that he simply forgot about the concerns I 

had expressed to him during the major aircraft review. He had no reason to 

dissemble, and he was put on the spot by a question he had not anticipated. 

A few months later, the contractors requested a bailout, embarrassing the 

Secretary, who subsequently ordered the program canceled. Two people on 

the Secretary’s staff argued against cancellation—me and the Director of 

Acquisition Policy, Eleanor Spector. Our new boss, who replaced the previous Under Secretary for Acquisition at about that time, listened to us 

but kept his cards close. The decision meeting with Secretary Cheney took 
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place early one morning, and neither Eleanor nor I attended. A few hours 

later, another member of the acquisition staff, who had been in the Secretary’s briefing room for a subsequent meeting, dropped off a hard copy of a 

set of briefing charts he had found at the podium. They were the charts my 

boss, the new Under Secretary for Acquisition, had used to brief the Secretary. The final chart read: Recommendation—Termination. I don’t know to 

this day if that was the right decision or not. Most of the time, as Eleanor 

and I maintained, one is better off working through problems to get the 

needed capability. This isn’t always the case, however. I do know that 25 

years later the Navy still doesn’t have a stealthy tactical aircraft operating 

from a carrier, but we are getting close. 

The Advanced Self-Protection Jammer or ASPJ is another program that 

didn’t make it through the transition from development to production and 

fielding. ASPJ was another product of the fad of fixed-price development 

that was tried in the late 1980s. A good deal of my time in the early 1990s 

was spent cleaning up the many messes that this policy created. I have good 

experience-based reasons for wanting to avoid fixed-price development. 

ASPJ had another problem, however, and it had to do with algebra. 

ASPJ was a jamming system for tactical aircraft. Its job was in part to jam 

enemy air defenses so that tactical aircraft wouldn’t be shot down. In order to 

get through the Operational Testing phase to transition to full-rate production, ASPJ had to demonstrate that it could adequately perform this function. 

The metric for success was expressed as an algebraic equation that had to be 

statistically tested. The equation was built in part around the success of the 

jammer at defeating a threat after an air defense missile was launched against 

the aircraft with ASPJ on board. We made the mistake of not including the 

cases in which ASPJ was effective at preventing the launch, so these successes 

didn’t count as part of the test. Again, we found ourselves in a situation where 

changing the rules would have been viewed with suspicion in the political 

environment around struggling acquisition programs. In this case, we did 

make the needed changes, but for other reasons the program was canceled 

in the defense drawdown that followed the Cold War. It was later resurrected 

with a different name and ultimately fielded. 

A few years later, I had taken a position at Raytheon as Corporate Vice 

President of Engineering. We were in a tight competition with our most 

ferocious competitor, Hughes Aircraft, to build the next generation shortrange air-to-air missile, the AIM-9X. We thought we had a much better design than our competitor and were sure we could offer the customer much 

better operational performance. We had a problem, however. From what 

we could tell from the draft request for proposals we had seen and from 

discussions with the Air Force, there was no way our higher performance 
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could be considered in the source selection. We also anticipated a price disadvantage because our missile design, though innovative, was more complex—and we believed more costly as a result. 

I spent a lot of time in the Pentagon trying to get the program management, 

the operational community, or the Under Secretary for Acquisition to provide some way for our better operational performance (a bigger engagement envelope and higher probability of kill) to be considered in source 

selection. I failed. In this case, we lost—but this occurred just as Raytheon 

was buying Hughes. Hughes had bid very low; we speculated that this was 

done so Hughes could book the business to enhance its attractiveness as an 

acquisition. In some respects, this was a lowest price technically acceptable 

source selection, something many in industry complain about today and 

something I have tried to limit to cases where it is really appropriate. Most 

of the time we do want higher performance, if it is at a price we would consider reasonable. For the last few years, I have been encouraging or directing the military Services to provide bidders with a monetized adjustment 

in source selection as a means of encouraging innovation and obtaining 

best-value solutions. After several examples, it is clear that this approach 

is working. I wish it had been used in the 1990s when we were bidding on 

AIM-9X. 

While I was in industry, I served for some time on the Army Science Advisory Board. One study we were involved in was a review of a weapon system 

that had featured prominently in the First Gulf War. It happened to be a 

weapon system that my company produced. I don’t recall the reason, but 

as part of the study we needed some technical data on the system’s performance. For reasons we didn’t understand, we just couldn’t get the program 

office to give us the data, despite several requests. Finally, one of the study 

group’s members, retired Gen. Jack Vessey, the former Vice Chief of Staff of 

the Army, called the Chief of Staff to ask for some help. We got the data. I, 

however, got a call through my corporate headquarters to go to Washington to meet with a brigadier general on the Army staff responsible for the 

program to explain my reasoning, as I was associated with the request. The 

program office, fearing it might look bad somehow, had been slow-rolling 

us in providing the data and I was being called to task for having gone over 

everyone’s head to the Chief of Staff through Gen. Vessey. My management 

wasn’t pleased. Corporations know where their money comes from, and 

sometimes the people who control those funds have narrow ideas of what 

is right and what is wrong. 

Another incident from my time in industry involved what I can only describe as abuse of power by a government acquisition official. At the time, 

my firm had two matters, totally unrelated and involving two programs, 
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that we wanted resolved by the Service in question. One was a protest of 

a bid we had lost. It was not at all common for my firm to protest. We felt 

that it would upset our customers and that it was unlikely to succeed. In 

this case, we had lost a bid on something we considered a core business—a 

share of the market and a product that we had controlled for a very long 

time. We felt we had a legitimate reason to protest the source selection and 

it was important business—so we protested. 

The other matter was a request we made of the same Service on another 

program that was coming up for source selection. We wanted some changes to the request-for-proposal language, changes we felt were fair and that 

just happened to be to our advantage. With these two matters on the table, 

we were visited by a senior flag officer from the Service involved. He asked 

us which of the two matters was most important to us and told us that 

the Service’s decisions on them were “linked.” I was shocked. In my view, 

then and now, the government should be resolving disputes or issues with 

industry on a case-by-case basis on the merits. I never found out if this 

conduct was illegal, but I’m certain that it was unethical. The government 

should not cut backroom deals in which it coerces a contractor to give up 

a legal right to a decision on the merits in return for a competitive advantage. The government has immense power over contractors, and has an 

obligation to not abuse that power. When it does abuse its power, trust is 

destroyed. By the way, my colleagues from industry and I did exactly the 

right thing: We ignored the question. 

While I was in industry, I spent several years as an independent consultant. One of the projects I participated in was the Army’s Future Combat 

Systems program or FCS. Like A-12, this program wasted billions of dollars and delivered basically nothing to the Army. It was hugely ambitious, 

driven by a “vision” that was divorced from reality and hobbled by totally 

unrealistic direction on schedule, imposed from the top of the Army. 

The acquisition community within the Army took huge risks trying to execute the unrealistic 4.5-year schedule from start of development to a production decision—for the largest and most complex program in the history of 

the DoD. The acquisition strategy risks, including the contracting approach, 

a Lead System Integration, the immaturity of the requirements and the early 

loss of competitive incentives doomed the program before it started. The sanity check that the Under Secretary for Acquisition is supposed to provide 

failed under Service pressure to proceed. As soon as the responsible leadership departed the Army, the schedule was slipped 4 more years—but the 

damage had already been done. This is the most extreme example of something I have seen too many times; operational and Service leadership is always in a hurry and usually has no real understanding of what it takes to 
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design, prototype, test or produce a specific product. This mistake cost the 

Army more than $10 billion of precious research and development funds and 

several years of modernization that can never be recovered. 

The Services do have distinct cultures, and that includes how they relate to 

outside stakeholders and authorities. The classic allusion to “the dumb, the 

devious, and the defiant” isn’t wholly accurate, but there are times when it 

seems apt. A better characterization might be that the Army knows how to 

salute to a fault, the Air Force likes to cite Office of the Secretary of Defense 

(OSD) direction as to why it is acting in a certain way, and the Navy would 

strongly prefer that there be no OSD direction. That is certainly an oversimplification, but it is a rough approximation of reality. 

I could tell stories all day from my current tenure as USD(AT&L) about 

the Services, but here is one from my tenure as Principle Deputy Under Secretary: For some reason, we were having a meeting in my office 

with a brigadier general from the Army’s acquisition community. We 

got into a discussion of several options for how to proceed on a specific program. It wasn’t a decision meeting, and staff members were 

just tossing out ideas for discussion. We did this for about 20 minutes 

and the meeting broke up. About an hour later, I received a note from 

the Army Acquisition Executive complaining about all the direction 

the brigadier had been given. He walked out the room convinced that 

he had just been directed to do every one of the things that had been 

discussed, when in fact he had been directed to do none of them. Apparently, he went back to his office with his hair on fire and started 

ranting about all the crazy guidance he was getting from every member 

of the DoD acquisition staff. I’m guessing that the Air Force would have 

picked any guidance they liked and implemented it but made clear it 

was at the direction of the OSD. The Navy would probably have regarded it as an amusing conversation and largely ignored it. Try as I might, 

I don’t know that I ever convinced the Services, at least at the program 

manager level, to not take direction from random staff members with 

no directive authority over them. My policy was that the staff was there 

to advise me as the Defense Acquisition Executive, not to provide direction to the Services—but implementing that policy isn’t as easy as it 

should be. A program manager trying to get his program approved just 

wants it approved, and is likely to err on the side of accepting direction 

if he or she thinks it will help achieve the goal. I finally directed my 

staff to identify all comments on Service plans as “Defense Acquisition 

Board Issue,” discretionary, or administrative. This meant that I would 

have visibility into anything the staff thought was important to change. 

I think this has helped, but there is still room for progress. 
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We spend a lot of time trying to devise acquisition strategies that will effectively incentivize industry to deliver more of whatever the government 

wants. Industry has two priorities. In order of importance, they are to (1) 

win contracts, and (2) make money on them. The first is a prerequisite to 

the second. Government people should never lose sight of the fact that 

these imperatives always motivate industry. We can use them to get better 

results, but we need to be careful about unintended consequences. 

A case in point was the Joint Advanced Guided Missile or JAGM, an Armyled joint program. The Army was conducting a competition and had asked 

industry to build competing prototypes as risk reduction efforts in support 

of the competition. The prototypes were to be flight tested as part of the 

source selection. I had challenged the Army’s intention to use a fixed-price 

incentive contract for the next phase of work—Engineering and Manufacturing Development. My concern was the degree of risk for the upcoming 

phase. I asked the Army to bring in the engineers for the program to walk 

me through both competitors’ designs, the one they would use in the early 

prototype testing as part of the source-selection process and the production 

prototypes they were proposing to actually build in the next phase. What 

I discovered was that there was no traceability between the risk reduction 

prototypes and the production prototypes. Every subsystem of the missiles 

would have to be redesigned. The competitors were building “proof of principle” prototypes for the source selection. They were not reducing the risk 

in the designs they intended to build for production. 

As a result of this, I directed the Army to change the contract type to one 

more suited for the remaining risk. Probably more importantly, the light 

bulb went on about what the competitors were trying to do. They were not 

motivated to reduce risk. That would have entailed taking some risk, and 

that was the opposite of what they were motivated to do. They were motivated to win, which meant that they wanted a low-risk and successful 

flight test so that they could win the contract. The government had asked 

for the things our policy supports and the Congress expects: competitive 

prototypes and flight tests. The government failed to insist on prototypes 

with designs traceable to the designs being bid for production and to the reduction of the specific risks associated with those designs. We can’t blame 

industry for responding to the business incentives we provide. The government acquisition team must have the expertise it needs to understand what 

is required, and the professionalism to ensure that industry provides it. 

Industry will always act to maximize its return, and the government will 

get what it accepts. 

It has been a great honor to have led the terrific men and women in the 

DoD’s acquisition workforce. You are unsung heroes who, with equally 
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dedicated and patriotic people in industry, provide our men and women in 

uniform with the products and services they need to defend our freedom. 

I hope that some of these anecdotes will prove useful as you continue your 

efforts to improve even more on the great work you do every day. Thank 

you. It has been wonderful to have been part of this team.