United States General Accounting Office

GAO Report to the Secretary of Defense

March 1995 ACQUISITION

REFORM

Comparison of Army’s

Commercial Helicopter

Buy and Private Sector

Buys

GAO/NSIAD-95-54

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-260371 

March 17, 1995

The Honorable William J. Perry

The Secretary of Defense

Dear Mr. Secretary:

The Congress, the executive branch’s National Performance Review, and

the Department of Defense (DOD) have emphasized the need for reforming

the federal government’s acquisition processes. The federal acquisition

system has been described as complex, unwieldy, and in need of

comprehensive reform. One key aspect of the current reforms is to use

commercial procurement practices to buy commercial products.

Army officials have cited the acquisition of the Army’s New Training

Helicopter (NTH) as an early example of success in streamlining its

acquisition process to buy a commercial item. In this report, as a “case

study,” we (1) compare this Army acquisition with acquisitions by two of

the largest private sector purchasers of similar helicopters to determine

key differences between these buys and the reasons for such differences,

(2) identify successes the Army achieved in streamlining the NTH

acquisition, and (3) discuss potential improvements that could be achieved

from acquisition reform efforts. Our comparison is not intended to suggest

that the identified private sector processes would be appropriate for a

government procurement. However, as the government moves to greater

use of commercial practices to procure commercial items, a comparative

analysis can be a helpful tool in gauging status and progress.

Results in Brief The Army’s acquisition of the NTH was vastly different than private sector

companies’ acquisition of similar helicopters. Specifically, the Army’s

acquisition took longer, involved more people, and generated significantly

more paperwork.

Key reasons for these differences were that the Army’s procurement

included

• the need to comply with a myriad of laws and regulations;

• more extensive and less flexible system requirements; and

• numerous documentation requirements for the proposal and award

process, including contingencies such as bid protests.

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Nevertheless, in procuring the NTH, the Army streamlined its acquisition

process somewhat and used more commercial-type practices. For

example, it adapted a commercial helicopter for the NTH rather than

pursuing a lengthy development program, deleted a number of data

requests and contract clauses from the request for proposals (RFP), and

used commercial standards in lieu of military specifications and standards.

In addition, the Army requested fewer program evaluations and other

documents than are normally required in the acquisition process—these

include functional areas such as testing, safety, and logistics.

We believe the Army could have made further improvements through

quicker approval of deviations and waivers and additional reductions in

contractors’ paperwork requirements. However, to significantly reduce the

differences between the Army’s and commercial sector’s acquisitions,

further reforms, such as those proposed by the Secretary of Defense and

called for in the recently enacted Federal Acquisition Streamlining Act of

1994, need to be implemented. For example, the act should significantly

expand and simplify the procurement of commercial items because it

stipulates a preference for such items and eliminates the applicability of

certain laws and clauses previously required. We believe, therefore, that

the Army’s NTH acquisition could be used as a baseline against which

further improvements that might result from acquisition reform initiatives

could be measured. However, for combat or other missions that can only

be satisfied by unique development efforts, the NTH would likely not

provide an appropriate baseline.

Background The DOD acquisition system has been described as a complex web of laws,

regulations, and policies adopted to, among other things, ensure

standardized treatment of contractors; prevent fraud, waste, and abuse;

and further socioeconomic objectives. This complex situation has been

cited by DOD officials as adding to (1) the time to procure commercial

items from the private sector and (2) the costs of such items in terms of

administrative burdens placed upon both DOD and its suppliers. Several

efforts are underway to change the way DOD buys commercial items. One

approach is to streamline or eliminate as many government-unique

requirements in the procurement of commercial items as possible. This is

what the Army stated was done in the procurement of its NTH.

Although the NTH acquisition began several years before the current reform

efforts, the Army’s objective was to streamline the cost of entry-level

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rotary wing training by using a “not-business-as-usual” approach to the

acquisition process. To reduce the cost of this training without degrading

its effectiveness, the Army sought to replace the UH-1 Huey with a

commercial helicopter that had lower operating costs. The Huey, although

more effective than the system it replaced, was also more expensive to

operate and maintain. A 1989 study estimated that expenses could be

reduced by about $40 million a year by using a new training helicopter

rather than the Huey. Thus, the Army incurred extra cost every year until

the NTH replaced the Huey.

The Army awarded a contract in March 1993 to Bell Helicopter, Textron

Incorporated, for delivery of 157 NTHs and 12 cockpit trainers with

deliveries beginning in October 1993. The contract price was about

$85 million. The Army began training with the aircraft—a commercial

nondevelopmental item1

 that was certified by the Federal Aviation

Administration (FAA)—in April 1994. The NTH, as shown in figure 1, is now

being used for all phases of the Army’s entry level rotary wing training.

Figure 1: The Army’s New Training

Helicopter

1

DOD regulations define a nondevelopmental item to include, among other things, commercial items

and commercial items modified for military use. In 1994, the Federal Acquisition Streamlining Act

defined commercial items to include items available to and used by the general public that incorporate

minor modifications to meet federal requirements.

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Our comparison of the Army’s NTH and the private sector purchasers’

processes is limited in a number of respects. For example, the Army NTH

buy consisted of 157 helicopters while the private purchasers stated that,

for them, a large buy would be about 10 aircraft. However, since DOD is

moving toward adapting the processes of world class customers in buying

commercial products and the Army has identified the NTH as a successful

commercial procurement, we believe these commercial purchasers’

processes can serve as an indicator of progress in moving away from

government-unique terms, conditions, and practices. Appendix I details

the acquisition process for both the Army NTH buy and the private sector

purchasers included in our work.

Army’s NTH Buy

Differs From Private

Sector Helicopter

Buys

Differences we noted in the Army’s NTH buy and acquisitions by the private

sector purchasers we spoke with appear quite significant. One main

difference is that the Army’s NTH acquisition took more time. From the

time the need was identified in 1986 to initial aircraft delivery in 1993 was

7 years. Of this time, it took about 23 months from the time Congress

approved funding for the purchase in November 1991 to initial delivery in

October 1993. In comparison, the major private sector purchasers of

helicopters we spoke with stated that their acquisitions of similar

helicopters normally take about 3 months from the time a customer

identifies its need until aircraft delivery. This time frame, according to

these purchasers, does not normally include the time it takes the

customers to develop their requirements and obtain funding for the

aircraft. Whether the 23-month period or some other period is most

appropriate as a comparison with the time required for private sector buys

is debatable; however, DOD and service officials acknowledge that the time

to acquire their aircraft was a considerably longer period than that

required for private sector acquisitions.

Additionally, the Army involved several hundred government personnel in

the acquisition process while the private sector purchasers involved just

five to seven people. However, the government personnel’s involvement

with the acquisition varied significantly from full-time participation to

attending a few meetings. According to Army representatives, a core group

of about 50 people was significantly involved in the program management

and the evaluation and selection of the NTH contractor.

We also noted that during the Army’s NTH acquisition process, contractors

and government officials were required to provide large quantities of data.

For example, the contractors were required to respond to the RFP with

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seven separately bound volumes, which included an overall executive

summary for their proposal in one volume, their technical proposal

approach in another, and their cost proposal in another. Furthermore,

numerous copies of each volume were required—specifically, 50 copies of

the executive summary and from 10 to 20 copies of each of the remaining 

6 volumes were required. One contractor’s representative stated that its

proposal contained 62 pages of life-cycle cost data, including such

information as the parts requirements per month, compared to 1 to 2 pages

of cost data normally required in a commercial contract. A representative

for another contractor that responded to the RFP stated that a truck was

rented to deliver the proposal because the Army required so many copies.

The private sector purchasers we talked with did not require this type or

quantity of data. We were told that they only asked for a few pages of data.

Army officials also noted that they were required to submit a number of

program documents, some of which they believed added no value because

a commercial aircraft was being bought. These included a Test and

Evaluation Master Plan and a Safety and Health Data Sheet. Similar

documentation was not required in private sector purchases of

helicopters.

Reasons for Differences Several reasons account for the key differences between Army and private

sector procurement. These include the Army’s (1) compliance with

numerous laws and regulations, (2) more extensive and less flexible

system requirements, and (3) need for documentation throughout the

proposal and award process. We were told these were not major factors in

private sector procurements.

Laws and Regulations Government procurements are subject to various statutory and regulatory

provisions that place requirements on government personnel and can

require contractors to revise or modify their commercial practices. Such

statutory provisions include (1) competition requirements that were

enacted to obtain low prices, avoid favoritism, and ensure offerers a fair

chance when competing for government contracts; (2) socio-economic

requirements to promote desirable social objectives; and (3) audit

requirements developed to ensure the government obtains what it pays

for. Audit requirements include the Truth in Negotiation Act’s (TINA)

requirement for contractors to submit cost or pricing data. Regulatory

guidance includes the Federal Acquisition Regulation (FAR) and DOD’s

acquisition and budget guidances—DOD Directive 5000.1—Defense

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Acquisition, and Directive 7045.14—The Planning, Programming, and

Budgeting System.

Government and contractor officials have often identified such

government-unique requirements as impediments to commercial buys. In

fact, one contractor noted that the possibility that the NTH procurement

could have involved TINA requirements almost resulted in his company not

submitting a proposal. Although the planned competitive procurement was

not subject to TINA requirements, the contractor was concerned that

changes in the procurement process or modifications to the NTH contract

after award could in some way involve certified cost or pricing data. In

fact, an August 1992 draft RFP stated that although the contractor may not

be required to submit a signed certificate, “the contracting officer,

however, reserves the right to require the certification if it is determined,

prior to award, that adequate competition does not exist or if the

possibility of overpricing exists.” This could have opened the concerned

company’s books as well as its subcontractors’ books to government

inspections. An Army contracting representative commented that it does

not make sense for the government, when seeking the benefits of buying

commercial products, to place such requirements on contractors whose

products have already been produced for the commercial market.

Concerning regulatory provisions, Directive 5000.1, for example, defines a

disciplined approach to the integration of DOD’s requirements, acquisition,

and budgeting processes. Generally, a DOD acquisition program is

(1) initiated in response to a validated military need that becomes an

approved requirement, (2) prioritized and must compete for funds in the

DOD Planning, Programming, and Budgeting System, and (3) further

prioritized and must vie for funds during the congressional authorization

and appropriation process.

This process of prioritizing and competing for funds frequently results in

changes and causes funding uncertainties. In the case of the NTH, funding

uncertainties related to the budget and appropriation process and the

subsequent change in its acquisition strategy significantly increased

procurement time. Specifically, when the need for a new training

helicopter was recognized in 1986, the Army gave other systems a higher

priority for scarce procurement funds than the new trainer. As a result, the

Army decided to use operations and maintenance funds to lease the

aircraft and in 1990 received congressional approval to do so. Congress

subsequently decided it was more beneficial to buy the aircraft and in

November 1991, provided $23.5 million for the NTH initial procurement.

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The commercial purchasers that we spoke with acknowledged that they

were not subject to such legislative and regulatory constraints.

More Extensive and Less

Flexible Requirements

DOD’s traditional acquisition process is requirements driven; it begins with

an extensive identification of operational and performance requirements

derived from a variety of sources including the intended users (pilots,

maintenance personnel, and trainers). The initial requirements list is

subjected to scrutiny and compared to, but not limited by, what is

available in the commercial market. For the NTH, the Army specified 

83 of its requirements as critical, but several of these, such as a third seat,

crash-worthy fuel cells, and crash-worthy seats, were not available on any

potential competitor’s aircraft. Army representatives said they specified 83

critical requirements because FAA certification assured only basic

requirements and in an area such as aircraft instrumentation NTH students

must have a working knowledge of many more instruments than an FAA

certification required. They also stated that they had to be specific in their

requirements to avoid ambiguity.

In contrast, the two private sector purchasers said they were limited to

commercially available capability and would normally define only a few

requirements as critical. These representatives said that private sector

buyers define their requirements but may choose an item that provides

less. They further stated that, in contrast, the government requires its

contractors to meet stated requirements in an RFP or run the risk of being

found unacceptable. In some instances, they stated that the government

also required competing contractors to identify items capable of exceeding

government-defined requirements. For example, the RFP for the NTH states

that failure to achieve any critical requirements will result in contractors

being eliminated and also asked contractors to highlight any requirements

that have been exceeded and may result in training and safety benefits or

cost savings. An Army official said that such information was needed in

the NTH “best value” determination to properly assess and value those

items that exceeded the stated minimum requirements.

Documentation Related to

Proposal and Award Process

The government’s proposal and award process has been characterized as a

lengthy series of paperwork hurdles for both the contractor in trying to be

responsive to RFPs and for the government to be prepared for

contingencies such as bid protests. This process can substantially lengthen

the procurement process. Also if the process is not carried out properly, a

bid protest can ultimately negate the contract award.

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The Army was required to (1) provide a 15-day notice to companies before

releasing RFPs and (2) allow 30 days for such companies to respond.

Additionally, contractors who responded to this RFP, as discussed

previously, had to provide numerous copies of separate volumes of

information. Army officials that were involved with the NTH buy stated that

much of the documentation was required so the government could

evaluate the contractors’ claims about their helicopter’s performance. For

example, contractor claims about life-cycle costs and performance

characteristics had to be substantiated by various individuals within the

acquisition process, and as a result, numerous copies were required.

Again, the private purchasers noted that they did not make such data

requests. We were told that they only ask for a few pages of data.

Regarding bid protests, FAR Subpart 33-1 provides procedures to follow

should contract awards be protested to the agency, the General Services

Board of Contract Appeals (for automated data processing acquisitions),

or our office. Private sector purchasers, however, do not normally

encounter such protests. Army representatives told us that much of the

documentation they requested in the RFP and prepared on their own was

done in case of a bid protest. They stated that since the NTH buy was a

streamlined procurement process, they wanted to ensure that a clear audit

trail documented the actions taken and the reasons why.

A small team was informally formed to participate in meetings with the

offerers and to assist in the review and revision of contract documentation

so that these would be written in a clear, concise, and unambiguous

manner. An Army representative told us that when one of the four

competitors did protest the NTH award to our office,2

 the documentation

that had been gathered was essential in showing what happened during

the NTH competition and was instrumental in defending the Army NTH

procurement actions and resolving the protest in favor of the Army.

Army Streamlined

Acquisition, but

Additional

Improvements Were

Possible

Much of the Army’s streamlining can be attributed to the fact that it opted

for a commercial helicopter instead of pursuing a development program. A

development program would have added substantial time and cost to the

acquisition. In addition, by selecting a commercial aircraft, the Army was

able to test each offerer’s aircraft using the Army’s operating procedures,

methods, and personnel. All of this was done at the manufacturer’s

expense and allowed the Army to avoid an expensive testing program.

Further successes identified by Army officials include: (1) reducing some

2

Enstrom Helicopter Corp., B-253014, Aug. 13, 1993, 93-2 CPD 189.

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system requirements to make it easier for some contractors to compete;

(2) deleting some unnecessary data requests, contract clauses, and

specifications from the NTH RFP; and (3) preparing fewer program

evaluations and related documents. Although progress was made in these

areas, further improvements were possible.

Army Test Program

Avoided, but

Manufacturers Incurred

Significant Costs

Army officials noted that, in pursuing an FAA-certified aircraft, they saved

money and reaped many benefits by performing a Training Effectiveness

User Evaluation (TEUE) on the manufacturer’s aircraft instead of

conducting an expensive test program. The TEUE, according to these

officials, provided a means for the Army to test the NTH and see if it would

do the intended mission using the actual operating procedures, methods,

and personnel. This test was accomplished at the manufacturer’s expense

and the aircraft remained the manufacturer’s responsibility. While this test

may have been a significant cost benefit for the Army, some

representatives of the manufacturers told us that the TEUE was expensive

for them. One such official told us that, because of the costs relative to the

TEUE, his company would not participate in an effort like this again.

System Requirements

Reduced, but Further

Improvements May Have

Been Possible

Army officials stated that the procurement package used in the NTH buy

incorporated flexibility regarding what was an acceptable requirement

and, as a result, some system requirements were reduced. Specifically,

they stated that classifying their requirements as critical and noncritical

allowed the acceptance of less than specified needs for noncritical

requirements. Based on its analysis of comments received from

competitors, the Army reduced several requirements, including

• airspeed from 100 to 90 knots,

• a hover altitude from 4,000 feet density to 2,300 feet density,

• fuel capacity from 3-1/2 hours to 2-1/2 hours, and

• airframe crash-worthy limits from 26-feet-per-second to a limit open to

discussion based on contractor data.

An Army representative said that the reductions in these requirements

made it easier for contractors to compete. In fact, one contractor avoided

elimination from competition when the airspeed requirement was lowered

from 100 to 90 knots.

Although some requirements were reduced, contractors who responded to

the NTH solicitation noted that further Army concessions would have made

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it less burdensome in terms of people needed and paperwork required for

them to develop special Army-unique items. While requirements were

separated into critical and noncritical, contractors were still required to

respond to each. Furthermore, as previously noted, 83 requirements were

classified as critical. One requirement that contractors believed could have

been reduced was the “three seat” cockpit configuration whereby, in

addition to the instructor and student pilot, a second student in the aircraft

must have an unobstructed view of the instruments. Contractors stated

that this was the most difficult and costly requirement for them to meet.

Army representatives, however, stated that the cockpit configuration was

a critical requirement that was needed to save time and money. They

noted that because a second student was being exposed to and trained in

the cockpit environment and could interact with the instructor and other

student pilot, training time should be reduced.

Contractor Workload

Reduced, but More Is

Needed

The Army took several actions to streamline the acquisition of the NTH and

ease requirements on potential contractors. The RFP, for example, was

shortened from an initial draft of 330 pages to a final version of about 

100 pages. Army representatives said they eliminated unnecessary data

requirements, contract clauses, and references to military specifications.

For instance, an Army representative stated that 21 of 27 proposed data

items cited in the original RFP were unneeded and were subsequently

removed. The data demand for engineering change proposals, for example,

was removed from the RFP because the contractor rather than the Army

had configuration management responsibility. This data demand would

have required (1) the contractor to prepare engineering change proposal

documents, (2) Army engineers to evaluate and approve them, and (3) the

contractor to wait until funding was made available before proceeding

with the engineering changes. Further, the contractor would have had to

submit 28 copies of each change proposal for the Army to evaluate and

process.

The Army also eliminated about 98 contract clauses that were identified by

either the Army or contractors as being unneeded. As a result, the final RFP

referred to only 64 separate contract clauses, which are listed in 

appendix II, and included the full text of 8 other clauses.

Additionally, in purchasing an FAA-certified aircraft, the Army relieved

contractors of the cost of complying with extensive military specifications

and standards. Furthermore, other specifications and standards were

eliminated during the RFP review process. For example, the Army

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eliminated Military Specification MIL-Q-9858A, “Quality Program

Requirements,” from the final RFP since quality control processes, although

less onerous, were already imposed under the FAA certification. DOD and

contractor officials have often said that MIL-Q-9858A causes extensive

government oversight and additional contractor cost in assuring

compliance with various provisions for quality control such as maintaining

detailed records of tests and inspections taken in response to test

deviations, scrapped material, and process trends. Army officials told us

that this specification was not required for commercial aircraft but could

have been imposed in the NTH contract. Accordingly, compliance with this

specification could have added a substantial burden, especially on

contractors who did not do business with the government and did not

already have a system that met this requirement.

Despite the above reductions, the government still required a multitude of

data from offerers. This included the volumes of data in response to the

RFP and various details not typically provided to commercial customers

such as technical manuals and data about technical support. According to

the contractors, these requirements create a significant paperwork burden

because they must prepare and submit the documents to be considered for

contract award. A number of them stated that they spent millions of

dollars in preparing proposals and competing for the NTH contract. In

commenting on these data requirements, Army officials said that such data

could be justified by the significant differences between the nature of

Army operations and the private sector and by differences in the number

of aircraft bought.

Fewer Assessments and

Program Evaluations, but

Waivers and Deviations

Took Too Long

In addition to easing the paperwork burden on contractors, the Army was

able to streamline the acquisition process by waiving some reports, plans

and evaluation requirements. Some Army NTH representatives said the

waived documents were non-value-added because the NTH was an

FAA-certified aircraft with no combat mission. Waived reports include the

operational test and evaluation report that would have required time,

manpower, and other Army assets to prepare. For example, resources

would have been required to perform the test, which would have involved

participants from several Army testing and evaluation agencies as well as

Army pilots. The use of these resources could translate into substantial

costs to the Army. Other documents that Army representatives said they

waived because they were unneeded include:

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• System Threat Assessment Report, which documents the Army’s threat

assessment against a specific system. This assessment was waived

because the NTH is a training helicopter that has no combat mission.

• Live Fire Test and Evaluation Report, which is provided to Congress to

report results of realistic survivability or lethality testing. This report was

waived because the NTH is solely a training device with no combat mission.

• Development Test and Evaluation Report, which provides the results of

developmental test and evaluation of a system. This evaluation was waived

because the NTH is a nondevelopmental item and an FAA-certified aircraft.

The Army experienced delays in obtaining some deviations and waivers

because of legal concerns and pressure from officials in functional areas

within the acquisition process. For example, the Army requested a

deviation from the legal prohibition against allowing contract financing on

commercial products.3

 It took several months to obtain and did not arrive

soon enough for the Army to avoid developing three different options to

include in the RFP because of the uncertainty about whether the deviation

would be granted before the RFP due date.

One of the NTH competing contractors told us this was an example of the

government being out of “sync” with commercial procurement practices

by allowing fewer financing options than are normally available in the

private sector. An Army representative said failure to provide government

financing on commercial procurement such as the NTH could impede firms,

especially smaller firms, from bidding on government contracts for

commercial products. The impediment would result because firms would

have to invest their own funds or borrow large sums to finance production

if government financing is not available.

Army officials also identified some program documents as adding little or

no value to the NTH buy. In these instances, NTH program office

representatives explained that sometimes it was simpler to prepare the

requested documents than to obtain waivers because some functional

proponents had higher level support than the program manager. For

example, an NTH Program Office representative said the office yielded to

pressure from the testing community by preparing a Test and Evaluation

Master Plan, which when approved said little more than development and

operational testing were not necessary because the NTH is a commercial

helicopter. The Army hired a contractor to prepare this 64-page plan,

which was completed in about a year and cost about $70,000.

3

The Federal Acquisition Streamlining Act, enacted in October 1994, eliminates this prohibition and

authorizes government financing under such terms and conditions as are appropriate or customary in

the commercial marketplace for commercial items. This includes advance payments up to 15 percent.

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In addition to the Test and Evaluation Master Plan, other examples of

program documents that added little or no value, according to Army

officials, included:

• Human Factors Engineering Report, which identified concerns such as the

minimization of crew workload for the NTH. While the program manager

was able to eliminate certain sections of the report, he was unable to

waive the entire document.

• System MANPRINT Management Plan, which provided optimum man and

machine interface for the already designed nondevelopmental item.

• Computer Resources Life Cycle Management Plan, which was a 22-page

plan that stated that since the NTH is a commercial, nondevelopmental

item, no unique software for operation or support was required.

• Safety and Health Data Sheet, which provided information about safety;

radioactive materials; explosives and hazardous materials; munitions; and

health hazards, such as acoustical energy, biological and chemical

substances, oxygen deficiency, and radiation energy. Although the NTH

solicitation specifically required an FAA-certified aircraft, the safety

functional proponents ultimately required the Army to prepare the data

sheet. Army proponents of the Safety and Health Data Sheet insisted that

noise test data be gathered for the NTH. The Program Office, the FAA, and

the contractor believed that such data was unnecessary because this was

an FAA-certified aircraft and over 4,000 Bell Jet Rangers were flying.

Acquisition Reform

May Offer Additional

Opportunities

To significantly reduce differences between the Army’s and commercial

sector’s acquisition processes, further reforms—such as those set forth by

the Secretary of Defense and Congress—would be required. Specifically,

many of the laws, regulations, and other reasons for the extended NTH

acquisition process, the numerous participants, and extensive paperwork

requirements could be reduced when various DOD initiatives and the

recently signed Federal Acquisition Streamlining Act of 1994 are

successfully implemented.

DOD’s Blueprint for a

Commercial Purchasing

Environment and Recent

Legislative Reforms

In February 1994, the Secretary of Defense told Members of Congress that

it was imperative that the United States be able to rapidly obtain

commercial and other state-of-the-art products and technology to meet

post-Cold War security challenges. He noted, however, that the DOD

acquisition process—which is subject to considerable “stove-piping” of

functions and massive coordination requirements, in addition to extensive

laws, regulations, and oversight requirements—basically impeded DOD’s

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access to such commercial items. As an example, he stated that, under the

current process, DOD was often unable to buy commercial products, even

when they were cheaper. He then presented his vision to transform DOD’s

acquisition process into a commercial purchasing environment. This vision

statement was based on recommendations in the executive branch’s

National Performance Review and the Section 800 Panel report.4

Among other things, the Secretary asserted that acquisition laws and

regulations must separately define and state a clear preference for

commercial items over other nondevelopmental items, and specially

designed items. To accomplish this, he contended that commercial

acquisitions should be exempt from government-unique laws, regulations,

procedures, processes, or practices. He noted that acquisition policies and

processes must be structured so that the fewest number of people are

involved in a given process and the time required to acquire products and

services is substantially reduced.

He further stated that there should be (1) a mandatory exemption from

TINA requirements to submit cost or pricing data for most commercial item

acquisitions and (2) approval of and authorization of waivers for the DOD

pilot programs. The Section 800 Panel report noted that TINA requirements

created a barrier for the use of commercial and modified commercial

products by DOD. The Panel, in recognition of TINA’s adverse impact,

drafted an alternative pricing provision. The Secretary requested the TINA

exemption as a major step to creating a commercial purchasing

environment. Regarding the pilot programs, he noted that, since some time

will be needed to revise regulations and train personnel in the new

purchasing environment, approval of DOD’s pilot programs would “jump

start” acquisition reform by allowing the immediate purchase of

commercial and commercial-like items using commercial practices.

In October 1994, Congress passed the Federal Acquisition Streamlining

Act, which incorporated many of the Secretary’s proposals. Through this

act, Congress, among other things, sought to encourage the purchase of

commercial items in the government and reduce impediments to these

purchases. One provision required the FAR to include a list of statutes that

are inapplicable to contracts and subcontracts for acquiring commercial

items. Several such statutes were identified in the act and included the

ones related to

4

This is DOD’s Acquisition Law Advisory Panel’s report entitled Streamlining Defense Acquisition

Laws, which was convened under Section 800 of the National Defense Authorization Act of 1991.

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• contingent fee certifications,

• Anti-Kickback Act procedural requirements,

• Drug-Free Workplace Act requirements,

• subcontractor direct sales limitations to the United States,

• suspended or debarred subcontractors identification requirements,

• procurement integrity certifications, and

• Clean Air Act certifications.

Such government-unique requirements were found to be inconsistent with

normal commercial practice and a driver of increased administrative

expenses and paperwork for commercial companies awarded government

contracts for commercial items. All of the above requirements were

included in the NTH solicitation. At the time of our review, DOD officials

informed us that, as part of the regulatory implementation of the Federal

Acquisition Streamlining Act of 1994, they have ongoing efforts to develop

the lists of inapplicable statutes for commercial procurements.

Additionally, the act includes, among other things, provisions that:

• Establish a clear preference for the use of commercial items over other

nondevelopmental items and unique government-designed items (as set

forth in the Secretary’s vision).

• Require preliminary market research before developing new specifications

and before soliciting any bids or proposals in excess of $100,000. This was

done to determine whether agency needs could be met by available

commercial items and is a process quite similar to the way the private

companies we spoke with make purchases—that is, identifying what is in

the market and making tradeoffs instead of using the more independent

requirement development process that existed for the NTH buy.

As previously noted, the act also authorizes commercial item payments

using commercial terms and conditions when in the best interest of the

United States. Under this arrangement, financing payments could be used

unless the agency head determines that such payment is inconsistent with

terms and conditions in the commercial marketplace or not in the

government’s interest. As discussed, such a change could have been

beneficial in the NTH procurement and would have precluded the time lag

and other problems associated with the NTH Program Office’s attempt to

waive the prohibition on contract financing for commercial items.

Additionally, the act includes certain provisions that are designed to

improve the purchasing environment for commercial items. These include

Page 15 GAO/NSIAD-95-54 Acquisition Reform
B-260371 

the (1) authorization of DOD pilot programs to test innovative procurement

procedures and (2) exemptions to TINA requirements for the submission of

cost or pricing data. Regarding the DOD pilot programs, Congress approved

special statutory authority for five of the seven acquisition programs

originally nominated by DOD. To date, DOD has granted the participating

programs waivers from regulations not required by statute, and worked

with the programs to develop measurement processes to determine the

success of the acquisition approaches made possible by waivers.

Regarding TINA requirements on commercial items that are not acquired

competitively, the act requires the contracting officer to seek information

on prices at which the same or similar items have been sold in the

commercial market. If the information is adequate to evaluate price

reasonableness, the contracting officer must exempt the procurement

from cost and pricing data requirements.

These and other changes appear to be a big step toward reducing the “red

tape” and administrative burdens associated with the government’s

acquisition of commercial items. It should be noted, however, that no one

has data on how much such reforms will reduce the cost, time, number of

participants, or paperwork required in DOD’s acquisition of commercial

items. DOD officials, however, have stated that they currently have ongoing

efforts to quantify and collect such data. This type of information is key in

determining whether adapting commercial practices to procure

commercial items will provide significant benefits to DOD. We, therefore,

believe that the Army’s NTH streamlining effort could be used as a baseline

against which further improvements that might result from acquisition

reforms could be measured. However, some combat or other missions are

only satisfied by unique development efforts (such as the B-2 and F-22). In

such cases, the NTH would likely not provide an appropriate baseline.

Agency Comments In commenting on a draft of this report, DOD stated that it concurred with

the report. DOD also agreed that the Federal Acquisition Streamlining Act

offers even more opportunity for the use of commercial practices and for

improved government procurement of commercial type items. DOD’s

comments are reprinted in their entirety in appendix III.

Scope and

Methodology

We reviewed the Army’s NTH acquisition and related documentation

including, but not limited to, various draft and the final RFP, and an Army

after action report entitled “New Training Helicopter Acquisition Process.”

We compared this NTH acquisition to acquisitions of similar commercial

Page 16 GAO/NSIAD-95-54 Acquisition Reform
B-260371 

helicopters made by private firms. To accomplish our objectives, we

gathered and analyzed applicable data regarding each of the above and

interviewed a number of officials within the Army, DOD, and the private

sector. These included individuals from: the U.S. Army NTH Product Office

at the Army Aviation and Troop Command in St. Louis, Missouri; the

Army’s Aviation Training Brigade located at Fort Rucker, Alabama; Bell

Helicopter, Textron Incorporated, located in Fort Worth, Texas; the

Defense Plant Representative’s Office located at Bell Helicopter; American

Eurocopter Corporation located in Grand Prairie, Texas; Premier

Helicopter Company located in Grand Prairie, Texas; Enstrom Helicopter

Corporation located in Menominee, Michigan; Grumman Aerospace and

Electronics Corporation located at Bethpage, New York; and Petroleum

Helicopter, Incorporated, and Keystone Helicopter Corporation—two

major private sector helicopter purchasers—located in Lafayette,

Louisiana, and Westchester, Pennsylvania, respectively.

In addition, we reviewed (1) the Secretary of Defense’s acquisition reform

plan entitled “Acquisition Reform: A Mandate for Change,” which was

presented before the House Committee on Armed Services on February 9,

1994; (2) the Federal Acquisition Streamlining Act of 1994, Public Law

103-355; and (3) various reports and studies relative to commercial

practices and the federal government’s procurement of helicopters. We

conducted our work between February and December 1994 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to interested congressional

committees. We will make copies available to others upon request. Please

contact me on (202) 512-4587 if you have any questions concerning this

report. Major contributors to this report are listed in appendix IV.

Sincerely yours,

David E. Cooper

Director, Acquisition Policy, Technology,

 and Competitiveness Issues

Page 17 GAO/NSIAD-95-54 Acquisition Reform
Contents

Letter 1

Appendix I 

Process for Army

NTH Buy and Process

Used by Some Private

Sector Purchasers of

Similar Helicopters

20

Army’s NTH Acquisition 20

Private Sector Procurement 24

Appendix II 

Contract Clauses

27

Appendix III 

Comments From the

Department of

Defense

29

Appendix IV 

Major Contributors to

This Report

30

Table Table 1.1: Key Events in the NTH Acquisition 20

Figure Figure 1: The Army’s New Training Helicopter 3

Abbreviations

DOD Department of Defense

FAA Federal Aviation Administration

FAR Federal Acquisition Regulation

NTH New Training Helicopter

TEUE Training Effectiveness User Evaluation

TINA Truth in Negotiation Act

RFP request for proposals

Page 18 GAO/NSIAD-95-54 Acquisition Reform
Page 19 GAO/NSIAD-95-54 Acquisition Reform
Appendix I 

Process for Army NTH Buy and Process

Used by Some Private Sector Purchasers of

Similar Helicopters

Army’s NTH

Acquisition

The Army’s NTH acquisition strategy changed over the life of the program.

Initially, the Army proposed a lease it called a “turnkey” or Single

Contractor Aviation Trainer concept where one contractor would provide

aircraft maintenance, support, and conduct the Initial Entry Rotary Wing

flight training using contractor instructor pilots. Concerns about the cost

of the concept and its potential to adversely impact existing training

operations resulted in the Army revising its plan to a lease with an option

to buy. The Army received congressional authorization in November 1990

for a 5-year lease of the trainer aircraft. However, Congress repealed this

authorization the following year and directed the Army to present a direct

buy strategy.

The NTH acquisition extended over about 7 years from the time the need

for the NTH was identified in 1986 to initial aircraft delivery in 1993. For the

first 4 years, most of the effort was devoted to leasing because

procurement funds were not available. Concurrent with finalizing whether

to lease or buy, the Army was involved in developing and approving

detailed operational and performance requirements for the NTH. As

discussed below, this was an iterative process throughout the acquisition

cycle that involved numerous participants such as the users, potential

contractors, and the buying commands.

Table 1.1 provides an overview of key events during the 7-year acquisition

of the NTH. The table is followed by a more detailed discussion of key

events of each acquisition phase.

Table 1.1: Key Events in the NTH Acquisition

Year Phase Responsible organizationa Participants and events

1986 R Headquarters Army Vice Chief of Staff directs new training

helicopter be acquired.

1987 R Aviation Center User representatives meet to discuss requirements

for the NTH.

P Buying command Industry interest in NTH solicited via a Commerce

Business Daily announcement.

P Contractors Several contractors respond to the Commerce

Business Daily announcement.

1988 P Aviation Center Communicates with contractors about NTH.

R Training Device Program Manager Tasks contractor to perform an economic analysis

of initial entry rotary wing training.

R, P Contractors Meet with congressional representatives about the

NTH program.

N Aviation Center Begins purging prior trainer out of inventory.

(continued)

Page 20 GAO/NSIAD-95-54 Acquisition Reform
Appendix I 

Process for Army NTH Buy and Process

Used by Some Private Sector Purchasers of

Similar Helicopters

Year Phase Responsible organizationa Participants and events

1989 R Headquarters Briefs House and Senate Armed Services

Committees on planned acquisition.

R Aviation Center Provides Training and Doctrine Command with

requirement document.

R Training Device Program Manager Completes economic analysis of an integrated

system for initial rotary wing training.

R Training and Doctrine Command Approves economic analysis performed by

contractor.

P Aviation Center Issues draft request for proposals.

P Training Device Program Manager Briefs Army Aviation Center on lease concept for

NTH.

R Headquarters Validates economic analysis performed by

contractor.

R Training and Doctrine Command Approves Commercial Training Device

Requirement document.

P Headquarters Reviews draft lease language.

1990 R Headquarters; Training and Doctrine Command Authorizes acquisition of NTH from a requirements

standpoint.

R Program Manager for Training Devices Performs market survey of commercial users.

N Headquarters Army Acquisition Executive directs the NTH to be

managed by the Army buying command.

N Congress Authorizes a 5-year lease of the NTH.

1991 N Training Device Program Manager Transfers management responsibility to Army

buying command.

S Buying command Convenes senior level review board and requests

designation of source selection authority.

S Headquarters Army Acquisition Executive appoints source

selection authority.

P Buying command Issues draft request for proposals.

P Contractors Respond and comment on draft request for

proposals.

N Congress Repeals lease for the NTH.

N Headquarters Army Acquisition Executive directs the NTH be

managed by Program Executive Office—Aviation.

S, P Program Executive Office—Aviation Transfers NTH funding and staffing from Army

buying command to Program Executive

Office—Aviation; issues a revised draft request for

proposal to contractors.

S Headquarters Source selection authority appoints the source

selection advisory council.

P Contractors Respond and comment on revised draft request for

proposal.

R Program Executive Office—Aviation Asks for a revalidation of Commercial Training

Device Requirement document.

(continued)

Page 21 GAO/NSIAD-95-54 Acquisition Reform
Appendix I 

Process for Army NTH Buy and Process

Used by Some Private Sector Purchasers of

Similar Helicopters

Year Phase Responsible organizationa Participants and events

R Training and Doctrine Command Revalidates Commercial Training Device

Requirement document.

1992 S Program Executive Office—Aviation First source selection advisory council meeting

held at buying command.

S Test and Experimentation Command Conducts Training Effectiveness User Evaluation

(TEUE) pretest Fort Rucker. at Fort Rucker.

P Aviation Center Hosts presolicitation conference for potential

contractors.

S Program Executive Office—Aviation Source selection plan completed.

P Test and Experimentation Command Attends presolicitation conference at Fort Rucker.

S Program Executive Office—Aviation Second source selection advisory council meeting.

S Test and Experimentation Command Prepares the TEUE test plan.

P Program Executive Office—Aviation Issues final request for proposals and hosts

preproposal conference for contractors.

P Contractors Submit proposals.

S Aviation Center Hosts TEUE.

S Contractors Attend TEUE at Fort Rucker.

S Program Executive Office—Aviation Source selection advisory council meetings III

through V.

1993 S Contractors Submit best and final offers.

S Program Executive Office—Aviation Holds source selection advisory council meetings

VI and VII.

S Headquarters NTH selection coordinated with acting Army

Acquisition Executive.

C Program Executive Office—Aviation Contract awarded March 30.

C Aviation Center Receives first NTH in October.

aOrganizations referenced are Army except for Congress and contractors.

Legend for phases

R = Requirements determination

P = Proposal solicitation

S = Source selection

C = Contract award/delivery

N = Not applicable

Requirements

Determination

The Army identified a need for a new training helicopter in July 1986 to

replace the aging and difficult to maintain helicopter then used for initial

rotary wing training. The Army’s process for developing operational and

performance requirements began with discussions with various user

Page 22 GAO/NSIAD-95-54 Acquisition Reform
Appendix I 

Process for Army NTH Buy and Process

Used by Some Private Sector Purchasers of

Similar Helicopters

organizations (such as pilots, maintainers, and trainers). The Army

eventually defined its NTH requirements to include

• a turbine-powered engine,

• three seats,

• dual controls,

• 90 knot airspeed, and

• selected crash-worthy features.

In 1989, the Army’s training school approved a statement of operational

and performance requirements that added additional details on various

categories of these requirements such as cockpit environment, navigation

and communication capabilities, maintainability, and reliability. In

February 1990, the operational and performance requirements were

approved and in mid-1990, an Army assembled team visited and surveyed

large users of commercial helicopters in the same class as the NTH to

obtain information on operating costs and performance.

Proposal Solicitation In September 1987, the Army solicited interest from industry in the

Commerce Business Daily by identifying its basic operational and

performance requirements. Subsequently, in February 1989, the Army

issued the first draft request for proposal (RFP), which consisted of 

330 pages, including a 42-page statement of work, a 16-page system

description, as well as referencing 81 separate contract clauses. Between

February 1989 and December 1991, the Army issued a number of draft RFPs

that consisted of hundreds of pages and requested potential contractors to

provide a multitude of information in a variety of categories.

Throughout the acquisition process, the Army received many comments

from industry. For example, 144 potential prime contractors and

subcontractors commented on its December 1991 draft RFP. Concurrent

with issuing the draft RFP, the Army involved a large number of people in

its decision-making process. For example, it held a presolicitation

conference at Fort Rucker, Alabama, during March 1992. Attendees

included 52 industry personnel and at least 19 government personnel

representing the Federal Aviation Administration (FAA) and several Army

commands responsible for training, testing, and procurement as well as

the Army’s training school. The final RFP for the procurement was issued

on May 1, 1992, and amended in August 1992.

Page 23 GAO/NSIAD-95-54 Acquisition Reform
Appendix I 

Process for Army NTH Buy and Process

Used by Some Private Sector Purchasers of

Similar Helicopters

Source Selection Process The Army’s source selection process incorporated procedures to choose a

source whose proposal has the highest degree of realism and credibility,

and whose performance was expected to best meet government objectives

at an affordable price. In November 1991, the Army appointed a source

selection authority for the New Training Helicopter (NTH). This individual

was responsible for (1) reviewing an advisory council’s recommendations;

(2) assessing the analyses of the contractors’ proposals that were

conducted by the source selection evaluation board; and (3) ultimately,

making the final source selection decision that was presented to the Army

Acquisition Executive. The source selection authority’s advisory council

included senior military and civilian officials representing several Army

organizations. According to an Army official, the evaluation board

consisted of about 100 civilian and military officials—including 25 full-time

members, 60 part-time members, and 15 consultants.

There were a number of meetings involving numerous participants during

the source selection process. The Army held a preproposal conference at

the Army’s procurement command in June 1992. The conference was

attended by at least 25 government personnel representing the FAA, the

Assistant Secretary of Defense, and 4 separate Army organizations as well

as 32 private industry representatives.

The NTH Source Selection Board evaluated the responding contractors’

proposals in six areas: (1) technical, (2) training effectiveness,

(3) management, (4) logistics, (5) past performance, and (6) cost.

According to the RFP, these areas were weighted as follows:

“Training effectiveness was more important than cost. Cost was more important than

logistics, which was more important than management or past performance. Management

and past performance were approximately equal.”

Contract Award and

Delivery

The Army received five proposals. The contract was awarded to Bell in

March 1993 and required Bell to deliver 157 TH-67, Bell Jet Ranger

helicopters. The basic Bell Jet Ranger is made at a Bell facility in Maribel,

Canada, and then flown to a Bell subcontractor facility in Fort Worth,

Texas, where the basic helicopter is modified to an NTH. Deliveries of the

NTH started in October 1993 and will continue through May 1996.

Private Sector

Procurement

We discussed and documented the private sector’s process for acquiring

helicopters with two large private sector commercial helicopter operators

Page 24 GAO/NSIAD-95-54 Acquisition Reform
Appendix I 

Process for Army NTH Buy and Process

Used by Some Private Sector Purchasers of

Similar Helicopters

that buy from several different manufacturers. To provide a perspective

for discussion, we have arranged the private sector practices into the same

categories we used for the NTH.

Requirements

Determination

The purchasers described a typical commercial helicopter procurement

starting with a determination of the customers’ requirements for a

helicopter.1

 According to the purchasers, this includes identifying such

characteristics as the aircraft’s size, speed, and range. They said that their

customer requirements are typically limited to what is available in the

commercial marketplace but can include some modifications. According

to these purchasers, this information is generally readily available and this

process can often be completed within hours or days. They further stated

that their customers usually have a couple of critical requirements and

that these requirements drive the process.

Proposal Solicitation The private purchasers we talked with stated that their proposals for buys

of about 10 aircraft could be up to 4 pages long, with the whole acquisition

process being completed in about 3 months. This includes the time from

when a customer identifies a need for an aircraft to its delivery.

Source Selection After evaluating the responses to proposals and discussing needs and what

is commercially available with the purchaser, the customer makes a

selection. Generally, the customer decides on a helicopter that meets most

but not all of the requirements. This type of decision is made based on a

cost/benefit analysis that may show the additional capability is needed

only a small percent of the time. In such a case, the purchaser may

recommend that the customer utilize an alternative to meet the additional

capability as a cost-effective solution.

Contract Award and

Delivery

Once the customer has made his decision, the purchaser will then lease or

buy the selected helicopter from a manufacturer based on cost

comparisons. We were told that, in total, only five to seven key purchaser

representatives were involved in the contract award decision.

The purchasers told us that they generally buy an unmodified aircraft.

They said that it is more cost-effective to make any modifications for their

1

This process does not include the time it took the customer to develop their requirements and obtain

funding for the aircraft. The private purchasers did not know what occurred prior to their customers

coming to them.

Page 25 GAO/NSIAD-95-54 Acquisition Reform
Appendix I 

Process for Army NTH Buy and Process

Used by Some Private Sector Purchasers of

Similar Helicopters

customer rather than having the manufacturer make modifications. They

further said that the manufacturer’s delivery time varies depending on

what aircraft are in their inventory. For example, one purchaser noted that

it took about 3 to 8 weeks from the time of order to receipt of an

unmodified aircraft. Modifications would lengthen this time; however,

both purchasers noted that from the time of order to final delivery was

about 3 months.

Page 26 GAO/NSIAD-95-54 Acquisition Reform
Appendix II 

Contract Clauses

1. Contracting Officer’s Representative

2. Statutory Prohibitions on Compensation to Former Department of

 Defense Employees

3. Special Prohibition on Employment

4. Termination—Commercial Items

5. Invoice and Payment—Commercial Items

6. Changes—Commercial Items

7. Patents and Copyright Indemnification—Commercial Items

8. Inspection and Acceptance—Commercial Items

9. Title and Risk of Loss—Commercial Items

10. Price Reduction for Defective Cost or Pricing Data—Contract

 Modifications—Commercial Items

11. Audit of Contract Modifications—Commercial Items

12. Technical Data and Computer Software—Commercial Items

13. Technical Data and Computer Software Withholding of

 Payments—Commercial Items

14. Certification of Technical Data and Computer Software

 Conformity—Commercial Items

15. Clauses to be Included in Contracts with Subcontractors and

 Suppliers—Commercial Items

16. Exercise of Option to Fulfill Foreign Military Sales Commitments

17. Small Business and Small Disadvantaged Business Subcontracting

 Plan (DOD Contracts)

18. Buy American Act and Balance of Payments Program

19. Qualifying Country Sources as Subcontractors

20. Preference for Certain Domestic Commodities

21. Preference for Domestic Specialty Metals

22. Preference for Domestic Hand or Measuring Tools

23. Ground and Flight Risk

24. Accident Reporting and Investigation Involving Aircraft, Missiles, and

 Space Launch Vehicles

25. Certification of Claims and Requests for Adjustment of Relief

26. Certification of Indirect Costs

27. Pricing of Contract Modifications

28. Officials Not to Benefit

29. Gratuities

30. Covenant Against Contingent Fees

31. Restrictions on Subcontractors Sales to the Government

32. Anti-Kickback Procedures

33. Price or Fee Adjustment for Illegal or Improper Activity

34. Limitation on Payments to Influence Certain Federal Transactions

35. Protecting the Government’s Interest When Subcontracting With

 Contractors Debarred, Suspended, or Proposed for Debarment

Page 27 GAO/NSIAD-95-54 Acquisition Reform
Appendix II 

Contract Clauses

36. Examination of Records by Comptroller General

37. Order of Precedence

38. Utilization of Small Business Concerns and Small Disadvantaged

 Business Concerns

39. Small Business and Small Disadvantaged Business Subcontracting

 Plan

40. Utilization of Women-Owned Small Businesses

41. Liquidated Damages—Small Business Subcontracting Plan

42. Utilization of Labor Surplus Area Concerns

43. Labor Surplus Area Subcontracting Program

44. Notice to the Government of Labor Disputes

45. Walsh-Healey Public Contracts Act

46. Equal Opportunity

47. Equal Opportunity Preaward Clearance of Subcontracts

48. Affirmative Action for Special Disabled and Vietnam Era Veterans

49. Affirmative Action for Handicapped Workers

50. Employment Reports on Special Disabled Veterans and Veterans of

 the Vietnam Era

51. Clean Air and Water

52. Drug-Free Workplace

53. Duty-Free Entry

54. Restriction on Certain Foreign Purchases

55. Federal, State, and Local Taxes

56. Progress Payments

57. Interest

58. Assignment of Claims

59. Disputes

60. Protection of Government Building, Equipment, and Vegetation

61. Limitation of Liability—High Value Items

62. Limitation of Liability—Services

63. Commercial Bill of Lading Notations

64. Limitation of Price and Contractor Obligations

Page 28 GAO/NSIAD-95-54 Acquisition Reform
Appendix III 

Comments From the Department of Defense

Page 29 GAO/NSIAD-95-54 Acquisition Reform
Appendix IV 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

David Childress

Stacy Edwards

Marion A. Gatling

Kansas City Regional

Office

Lawrence A. Dandridge

David J. Henry

Lillian I. Slodkowski

John G. Wiethop

(705048) Page 30 GAO/NSIAD-95-54 Acquisition Reform
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