Ken Asbury NCMA Keynote Address "The Acquisition Process: Where Do We Go From Where We've Already Been?"
November 19, 2013
Thank you, Steve. I'd like to thank the leadership at NCMA for the kind invitation to speak today. And I would also like to extend my appreciation to the Government and Industry Contract Specialists, Negotiators, Administrators, Contracting Officers, Contracting Officer's Representatives and Technical Representatives, Subcontract Managers, Procurement and Purchasing Managers, Pricing Specialists and Analysts, Proposal Managers, and Business Development Professionals for their dedication and commitment to the acquisition process and the citizens we serve.
Perhaps the best way to begin my remarks is with a quote from one of history's giants that may ring a bell. Sir Winston Churchill once remarked: "Gentlemen, we have run out of money. Now we have to think."
How appropriate to what we've been experiencing over the past few years, months, and weeks. So let's take a brief tour of some of these recent disastrous developments that are continuing to affect us all:
Budgetary gridlock … the never-ending story of disagreement between the U.S. House and Senate that started this rollercoaster ride of on-again, off-again fiscal brinkmanship and threatens to continue to make our jobs even more difficult than they normally are.
Sequestration … those automatic spending cuts that resulted from the plunge off the fiscal cliff and raised havoc with program budgets across the federal landscape, wounding an economy that was just recovering from the impact of a recession.
Continuing resolutions … the dreaded CRs that forced us to lurch along amid stalled programs and suspended operations, simply because legislative agreements could not be reached.
Government shutdown … the ultimate stop sign to progress. It affected so many of you in the audience – and my own company, CACI. It made millions of citizens across America scratch their heads and wonder what went wrong and what can be done so that it isn't repeated again in a few months.
This is where we should heed Sir Winston's advice and start thinking. And here is what we should be thinking about:
Hiring freezes … how do we get our jobs done without the people we need?
Furloughs … what's the impact of important work not getting done, solicitations not being made, and contracts not being awarded because of forced time off?
Turnover in contracting officers … how does industry follow up on proposals when our points of contact keep changing? What can we do when turnover of contracting officer's representatives impacts invoice reviews and cash flow?
Shorter contract cycles … how do we fulfill mission requirements when contracts expire before all the requested components are in place?
Contracts awarded to low bidders, via Low Priced Technically Acceptable (LPTA) acquisition strategies, simply to address budget challenges and shortfalls, simplify source selections or avoid protests … this is too painful for me to even comment on. It's the source of many sleepless nights for me, both as a CEO and as someone who takes pride in delivering quality work with integrity.
Delayed payments … the "check is in the mail" syndrome we know and love so well.
The inefficiency of spending more . . . multiple times, rather than getting it right the first time … with changing landscapes and casts of players, it's not surprising that finding the right solutions may take several attempts.
A host of missed opportunities … coulda, woulda, shoulda developed the optimum program if only all the pieces had been in place.
The reality check that one size does not fit all – for example, that services are acquired as if they are commodities or hardware – can happen, does happen, and will happen when the most experienced, most knowledgeable people are not in place. Services should be acquired differently than commodities because, generally, services are defined differently, have different performance risks, and over time the services requirement will change or evolve and the government needs the contractual flexibility to manage those changes. It's not like buying computer hardware or software. I'll come back to this concern about how services are acquired later in my presentation.
What's the result of this litany of unfortunate developments? A charitable answer is deep frustration among all concerned, a climate of skepticism among investors, a culture of confrontation, and a nagging uncertainty of what the future may hold.
Definitely not a good thing. But I haven't even mentioned the most serious consequence of what we have endured and what may be repeated early next year.
[Slide 4] What I'm referring to is that national security is jeopardized without the steady continuity of a consistent, reliable acquisition process that provides our Defense and Intelligence Communities with all the tools, technologies, upgrades, and professionals needed to defend and protect our nation from some very bad, very resourceful people.
Without such an acquisition process, the overarching questions are whether defense and intelligence contracts are going to the best qualified contractors … or to the lowest priced bidders … or simply to the those who can survive a draining series of protests and modified RFPs long enough to come out the winners.
I'm sure you'll agree that I'm not crying wolf. These events have piled one on top of another to exponentially increase the difficulties industry and government face in bringing critical solutions and services to our nation and all its citizens.
There has to be a better way! But what is it?
Here's a thought – let's have a government commission do a study and recommend how the acquisition process can be reformed!
What's wrong with that picture? Just this – over the past 50 years, a series of commissions and studies has tried to do just that.
Let's take a look at some major U.S. Commission Reports over the last 50 years:
- 1955 – Second Hoover Commission
- 1970 – Blue Ribbon Defense Panel (Fitzhugh Commission)
- 1972 – Commission on Government Procurement
- 1983 – Grace Commission
- 1986 – Packard Commission
- 1993 – Acquisition Law Advisory Panel (Section 800 Panel)
- 2007 – Acquisition Advisory Panel (SARA Panel)
Pretty impressive! But now let's consider this excerpted quote from the 1986 Packard Commission report:
"… instability in defense budget planning has been further exacerbated as result of the new Gramm-Rudman-Hollings legislation … DoD was forced to take a 4.9% reduction in each of almost 4000 programs, projects, and activities, for a total cut of $13.6B in budget authority and $5.2B in outlays. These across-the-board, automatic cuts allowed no analysis or management judgment to be exercised about priorities or about their effect on defense programs and forces. The essence of budgeting is setting priorities. Our recommendations depend upon a rational choice of priorities by responsible defense managers, as opposed to a mechanistic allocation of resources across all activities."
That was written in 1986 – 27 years ago – yet here we are again in the same acquisition quicksand. It's a clear case of déjà vu fatigue.
We've been there, tried many proposed solutions, but we haven't followed through. Maybe we should title that chart, Lessons Not Learned … or Acquisition Reform Through the Years.
So many studies … over so many years … with so many recommendations from so many very smart people – all with limited results. What a shame!
Now consider what Frank Kendall, Undersecretary of Defense for Acquisition, Technology, and Logistics, said at the Center for Strategic and International Studies early this month.
Outlining his plans for acquisition reform in an era of austerity, he commented:
"I shy away from the term acquisition reform and prefer acquisition improvement, which is deeper, because it implies a need for specific things you can do because you can't just do away with the whole thing and start over."
"A need for specific things you can do."
Well, here's one thing I think we should do – and it doesn't require a commission or study, or even any new laws or regulations: We must improve communications between industry and the federal contracting community. Why?
It's not complicated:
- Comprehensive communications result in superior understanding of federal agencies' mission requirements.
- Precise communications maximize innovative and cost-effective solutions and services from industry.
- Early communications translate into more complete and accurate proposals from industry and increased competition as more companies understand the requirement and can better assess the program risk.
- Sustained communications create superior contract performance and more competitive and accurate pricing.
From my perspective as CEO, all of this is relevant at CACI. In fact it is relevant to any company. The simple fact is that in today's constrained and uncertain budgetary environment any company that is going to survive and grow must have a sound strategic plan to address these challenging times. Comprehensive and sustained communications with our customers is an integral part of CACI's plan and our success in winning new business and retaining our current business – it's key to our three-part growth strategy. Our strategy is to:
- First, win new business.
- Second, drive operational excellence, or service excellence … focusing on best practices in all facets of our operations, sustaining our commitment to ethical business conduct, and closely coordinating our operations with customer requirements.
- And third, executing on the first priority for the deployment of our capital, our mergers and acquisition program, to bring in new customers and capabilities and support our growth.
With this three-part strategy, along with reducing our cost structure to achieve efficiencies, CACI has successfully adapted to today's uncertain market environment.
- We are winning significant contract awards and increasing revenue in our high-growth market areas of Business Systems, Cyber, Healthcare, and Integrated Security Solutions. We are also winning significant contract awards in our high-volume market areas of C4ISR, Enterprise IT, Geospatial, Intelligence, Investigation and Litigation Support, and Logistics and Material Readiness.
- We continually position ourselves to win new business with a top-caliber business development team that fully understands customer missions.
- We sustain a strong customer base through operational excellence, which fosters long-term, trusted customer relationships.
- We drive customer satisfaction by upholding the highest level of ethics through our CACI culture of honesty and integrity.
- We are leveraging our historically successful mergers & acquisitions program, investing our capital to bring in new capabilities to win new business and better meet our current customers' mission requirements.
- With our acquisitions of Delta, Emergint, and IDL, we positioned CACI to pursue more and larger business opportunities, expanded our customer base, and enhanced our support for the government's increasingly important need for better business systems and healthcare solutions.
- We just completed our acquisition of Six3 Systems, Incorporated, which is the largest acquisition in CACI's history. Six3 expands our addressable market by approximately $15 billion and positions us as a leader in advanced intelligence and cybersecurity capabilities that are essential to protecting our nation.
Our nation has always depended upon the private sector, and companies like CACI, to provide the goods and services needed for national security and citizen services. But never before has the government relied on industry for the depth and breadth of goods and services it requires today. This places the acquisition and contracting functions, and the professionals in both government and industry that perform those functions, at the nexus point of how the government accomplishes many of its missions.
This partnership between government and industry is what has delivered everything from the space program, to missile defense, to critical information technology modernization. In order to keep this winning partnership intact and avoid destroying contractors, we must stop:
- Delaying award decisions
- Awarding set-asides solely to meet statutory goals
- Slowing down payments and cash flow even more
- Failing to take advantage of industry services that are highly efficient, innovative, and timely
The bottom line is this: To advance the acquisition process, we need to place a premium on superior communications. Let's take Mr. Kendall's advice and improve the acquisition process … not spin our wheels by trying to reform it . . . yet again!
It's also worthwhile to take a look at similar recommendations from the Professional Services Council. PSC is a trade association focused on advancing positive relationships and communications between government and industry. With a membership of 375 federal services providers, PSC is the voice of the government professional and technical services industry.
In their 2013 report, From Crisis to Opportunity: Creating a New Era of Government Efficiency, Innovation and Performance, PSC made the following recommendations:
- Create a pre-award services classification to inform acquisition strategy based on the characteristics of the desired service.
- In turn, this creates a guideline for the development of acquisition strategies. It shapes a new taxonomy of services that will help the government meet acquisition goals by aligning what is to be procured with all the options available for such procurements.
- This should include not only levels of complexity and risk but also timeliness to complete the work. For example, the design and implementation of a complex information technology solution is likely to require a substantial long-term commitment. But the development and fielding of a new application might be completed in a six-week "sprint." The acquisition strategy must reflect these differences. The point is that services need to be acquired using acquisition strategies that fit the acquisition of services, not acquisition strategies appropriate for repeatable commodities.
- PSC's next recommendation is to avoid the use of LPTA acquisition processes for any requirement for which new or innovative solutions are sought. And we should include specific source selection scoring for innovation where innovation is desired in the acquisition.
- Innovation rarely occurs by accident. It must be actively and openly encouraged and clearly and objectively evaluated. Including specific source selection scoring for innovation where innovation is desired also signals a seriousness of purpose on the part of the customer.
- Many in government express concern that industry proposals are increasingly "vanilla," while many in industry argue that the "vanilla" nature of their proposals is driven by the objectives and evaluation factors of the government's RFP. By calling out innovation as a measurable and meaningful source selection criterion, it should become clear to all when and where innovation is genuinely sought.
- Also, by adopting a cost-technical tradeoff strategy – true best value – the government gains the flexibility to consider a range of technical solutions and costs. Even if price is the single most important factor in an agency's award decision, true best value enables the agency to make other judgments. Under an LPTA scenario, "technical acceptability" often becomes an exceptionally low bar, and the award must be given to the lowest bidder meeting these minimal technical qualifications.
- The final PSC recommendation I'll cite is to mandate post-award debriefings that are substantive, interactive, and provide a scope of information similar to that available through a formal discovery process.
- History has shown that high-quality debriefings help to prevent post-award bid protests. But recent evidence suggests that the quality of debriefings has dropped dramatically, too often only including electronic reports with no meaningful discussion, if they occur at all.
- This debriefing technique can also be applied to RFIs and draft RFPs. Government agencies don't always share their rationale for the decisions they make based on these useful pre-solicitation procedures. Sharing these decisions can generate better proposals from industry participants and, maybe more valuably, from those stakeholders who were unwilling or unable to participate in a particular acquisition.
My recommendations for better government-industry communications, along with these recommendations from PSC, are a great starting point for us to break the cycle from the past. We've been talking about how to make the acquisition process better for 50 years. Now is the time for us – government and industry – to act.
I'd like to close with my CEO wish list for all of us in this room:
- To keep dopen lines of communications among our many highly qualified, experienced professionals so we can build a stronger relationship between government and industry.
- To look at issues from other perspectives. Nobody has all the answers, so let's use the deep repository of best practices to learn from each other.
- And to agree on this fundamental truth: We're all here to serve our nation, keep it safe, and protect our way of life.
You and I are at the center of how government and industry will address today's stressful budgetary environment. I believe we all take pride in our mission and responsibilities because this is key to how successful our nation will be in managing through these difficult times. That's why it's my hope that out of these challenging conditions, we can pull together to improve the acquisition process and make it more effective and efficient through comprehensive, precise, and early communications between government and industry. When we do, it will benefit government, industry, and – ultimately – the citizens we all serve.
Thank you. I'll now be happy to take your questions.