Commercial Buying Practices in the Department of Defense: Barriers and Benefits

Even though there have been repeated calls for greater use of commercial purchasing practices in the Department of Defense (DoD), the actual adoption of such practices has been quite limited. This article explores the potential barriers and benefits of DoD use of commercial buying practices in the electronics, space, and aircraft industries. BACKGROUND Numerous commissions have called for streamlining and simplification of the defense acquisition process, especially when commercial or proprietary products are involved. Recommendations have included: 1. Emulation of private sector buying practices (1983 Grace Commission) 2. Decreased use of military specifications (MILSPECS) and increased use of commercial products (1983 Grace Commission and 1986 Packard Commission) 3. Use of commercial style competition rather than price-based competition (1970 Fitzhugh Commission and 1986 Packard Commission).|1~ Researchers have identified significant barriers in making such reforms. Fox concluded that in spite of 12 major studies since 1960, all with similar findings, virtually all attempts at improvement have fallen short. Barriers arise, not from a lack of ideas, but from the difficulty in identifying and changing counterproductive government and industry incentives.|2~ Gansler has called for increased use of commercial specifications and for deregulation to permit DoD to buy "standard commercial items by standard commercial practices."|3~ Researchers have also examined the policy issues and the regulatory structure related to the acquisition of commercial products which limit the judgment and flexibility needed to use commercial buying practices.|4~ Lamm identified barriers to doing business with DoD from a survey of 427 firms representing a cross-section of industries.|5~ MacManus conducted an extensive survey of 3,282 firms to identify problems businesses encounter when dealing with governments.|6~ Although the relative rankings are different, both found burdensome paper work requirements, low prices/profitability, delays in making awards, and late payments to be barriers or problem areas in doing business with government entities. Most of these studies have been conducted at a generic overview level. Just as there are great differences between the acquisition of weapon systems and commercial items, there are also differences between industry sectors. This article reports the results of three research efforts designed to identify the opportunities and the obstacles associated with DoD's use of commercial buying practices in the electronics, space, and aircraft industries. ELECTRONICS INDUSTRY DoD buys a wide spectrum of electronic products, including many commercial or commercial-like products. The quality and reliability of commercial electronic products have met or, at times, even exceeded DoD requirements. However, in many cases products must be modified to operate in hostile environments, such as that of Operation Desert Storm. To identify the barriers and benefits of pursuing commercial buying practices in the electronics industry, Holland conducted telephone interviews with 379 firms randomly drawn from The Electronics Industry Telephone Directory.|7~ Most of the firms had considerable experience in the electronics industry. Nearly 36 percent had 10 to 20 years experience. Another 35.6 percent had more than 20 years experience. Most of the firms (83 percent) were small businesses. The sample contained a mix of commercial and DoD firms, with 38.8 percent of them currently doing business with DoD. Barriers As detailed in Table I, respondents rated 17 potential barriers to doing business with DoD. In general, the barriers can be grouped into problems associated with contract requirements, the contracting process, and government personnel. The overall complexity of government contracts was a significant barrier for electronics firms. …