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Pentagon Official Announces Lower Cost Growth in Latest Acquisition Report

WASHINGTON, Oct. 26, 2016 — As he concludes five years in the position, the undersecretary for acquisition,technology and logistics, announced the release of the 2016 Performance of the Defense Acquisition System Annual Report during a media conference call, Oct. 21.

In the report foreword, Frank Kendall wrote that the findings indicate the Pentagon’s long-term effort to bring data-driven decision-making to acquisition policy is moving in the right direction “with regard to the cost, schedule, and quality of products” it delivers.

And while the five-year moving cost growth average on the DoD’s largest and highest-risk programs has dipped to a 30 year low, the undersecretary acknowledged that work remains on the department’s 1,100 contracts and 240 programs.

Under his charge to bring more discipline into the system, control costs and take a more realistic approach in acquisitions projections and planning, Kendall recounted the evolution and transformation of innovation in the military, noting periods of struggle.

When Kendall and then-Undersecretary of Defense Ash Carter developed Better Buying Power in 2010, one of the initiative’s goals was to focus efforts on the acquisition work force, cost control and cost-consciousness.

“We put a number of things in place to do that; we also wanted to provide better incentives to industry to perform more efficiently,” Kendall said. “We feel quite strongly we were successful.”

Since then, there have been two additional iterations of Better Buying Power, with the latest, BBP 3.0, emerging about a year ago.

Changing Business Relationships

Each of the initiatives, Kendall said, had at their core some management of the DoD’s business relationships with industry. “We set up structures which motivate people to perform more effectively.”

The BBP goals also include planning to ensure the DoD is taking some reasonable amount of risk, though no new product development programs are zero-risk or even necessarily low-risk, he said.

“But you can manage that risk,’ Kendall noted, “[and] during the last several years, we’ve made … pretty dramatic progress controlling cost growth on our major programs.”

Prior to that, the DoD put affordability caps on programs to constrain the requirements process so that “our reach does not exceed our grasp,” he explained.

While the latest report indicates most acquisition aspects continue improvement, Kendall acknowledged areas of concern, including competition, where he said he’d like to see an increase.

Kendall said analysis also included focuses on performance by industry, management information systems and sustainment, which led him to adopt the theme “Sustainable Minimum” for 2016. Rather than introduce a major new set of initiatives in the last year of the administration, the undersecretary said he opted to continue to reinforce and improve existing policies. “There was enough in the results from last year after a few years of consistent policies in acquisition to show we were going the right direction,” he said.

Ultimately, people are the heart of the acquisition corps, he said, not policies or measured progress against performance. “It’s the professionalism, the hard work, the dedication, strong incentives and support the work force has that at the end of the day is going to rule acquisitions,” Kendall said.

The undersecretary said that, in the past, DoD has tried to improve acquisitions through various measures, which in some cases have been arbitrary. Some have been successful and in some cases have yielded the opposite of the desired effect, he said.

“Focusing on the fundamentals, [having] the flexibility to do the right thing for whatever situation we have and being warrior professionals when we do that, is the right approach,” Kendall said.

(Follow Amaani Lyle on Twitter: @LyleDoDNews)