Stuart A. Hazlett Deputy Director, OUSD(AT&L) Defense Pricing Defense Procurement and Acquisition Policy A Presentation to NCMA Pentagon 8 September 2011 The Status of Better Buying Power

2 Better Buying Power Results  Promote Real Competition  Improve Tradecraft in Acquisition of Services  Quality of the Deal 2

3 Promote Real Competition What we’ve done:  Provided guidance for the development of Competition Strategies for review  Issued Departmental Guidance to conduct negotiations with all single bid offers based on cost or price analysis and using non-certified data  Clarified guidance on 30 day re-advertisement on one offer  Promulgated a maximum practicable opportunity analysis tool to help Components achieve small business goals What we are doing:  Requiring PEOs and PMs to present their strategy to create and maintain a competitive environment for their contractors at DAB and DAES reviews  Disseminating best practices to optimize small business participation across DoD  Modifying BBP guidance on 3 year re-competition requirement  Increasing emphasis on Mentor Protégé program and exploring other mechanisms for more non-traditional suppliers  Using the Peer Review Process to ensure that negotiated prices are fair and reasonable  Implementing open systems architectures and defining operational guidance for acquisition of data rights Measures of success:  The number of programs presenting competitive strategies at each Milestone  The increase in the number of small businesses and more "non-traditional" DoD suppliers to expand competition  The impacts on program cost resulting from the increased use of small businesses  Improvement rate of 2% per year for overall competition  Improvement rate of 10% per year for effective competition  Evidence of competitive strategies at DAB and DAES reviews  Reduced average time to field products/capabilities  Service examples of the successful use of open architecture and buying of data rights 3

4 Improve Tradecraft in Acquisition of Services What we’ve done:  Established senior mgr for acquisition of services and holding monthly meetings with component senior managers and DPAP  Issued Directive detailing specific implementation guidance for the effort to standardize service taxonomy  Required OSD Office of Small Business Programs to review acquisition plans for services acquisitions exceeding $1B, and to be members of the OSD peer reviews of services acquisitions  Developed guidance for establishing a taxonomy of preferred contract types in services acquisition  Employed standard templates for developing Performance Work Statements to improve contract performance What we are doing:  Encouraging the use of Multiple Award/IDIQ contracts among small businesses, where suitable  Establishing market research teams within the senior manager for services construct at the portfolio manager level to understand industry’s capabilities  Developing tools to assist requirements developers in creating better service contracting requirements Measures of success  Increased use of CPFF and CPIF contracts in services acquisition when no previous competition exists, with evidence of knowledge gained informing future "Should Cost" estimates  Increased use of FFP contracts when competition already exists  Percentage of service contracts exceeding $1B that contain cost efficiency objectives  Percentage of multiple award service contracts exceeding $1B that are set aside for small business  Percentage of “one-bid” contracts relative to overall contracts and availability of fully negotiated pricing and cost data  Component categorization of service acquisition spend, with year-to year trend data - 4

5 Quality of the Deal What we’ve done:  Increased the use of FPI contract vehicles where appropriate  Taken advantage of highly productive acquisition strategy opportunities (i.e., LCS)  Asked Congress for block buy authorization for some programs  Issued guidance on progress payments of Fixed Price contracts  Published Cash Flow model for other than customary progress payments  Developed plan for collecting data/initiating pilot to improve industry IRAD return on investment What we are doing:  Working with industry to define win-win arrangements to drive productivity gains  Developing other opportunities for more efficient acquisition strategies (e.g., missile systems)  Holding production rates at economic levels (e.g. SDB II)  Challenging programs that are not affordable at economic rates  Reviewing Weighted Guidelines emphasizing the tie between profit and performance  Transitioning SSIP to a full DoD program with Navy still leading Measures of success  Lower costs in production and sustainment on programs  Percentage of Acquisition Strategies with distinct reward and incentive strategies  Cost savings from WG strategies  Number of fewer programs that overrun their cost targets  Number of improved cash flow opportunities that provide benefit to industry and taxpayer  Reinvigorated IRAD program with greater insight into link between funding and technology  Increased employment of FFP contracts 5