2015 Fall Training Conference Acquisition Reform – Assessing the Impact on Business Opportunities
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Member Update & Commercial Market Initiative
• Roger Waldron – President, The Coalition for Government Procurement
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Commercial Market Initiative
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“While the MAS program has expanded and adjusted over the years; modernizing MAS to enhance this incredibly successful, $38 billion a year program will ensure that it continues to offer the efficiency and value it was created to provide.” ̶ Tom Sharpe, FAS Commissioner, GSA
Modernizing GSA’s Schedules Program for Today’s Marketplace, GSA Blog, June 12, 2014
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2015 Multiple Award Schedules Environment Standard Processes Complex time-consuming contract negotiation and evaluation processes based on outdated acquisition policies
+ GSA MAS Transformation Initiatives Competitive Pricing Initiative
Transactional Data
Reduce price variability for identical Schedule contract products and services through horizontal pricing comparisons
Make pricing and other data available to Federal agencies to facilitate better purchasing decisions
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Transactional Data Proposed Rule • Published March 4, 2015 • Contractors to report transactional data from orders and prices paid by ordering activities • FSS contract and GSA non-FSS contract orders (not VA) • Report transactional data at the order and BPA level to GSA monthly Transactional Data Contract or BPA Number
Unit Measure (each, hour, case, lot)
Order Number/Procurement Instrument Identifier (PIID) Non Federal Entity, if applicable
Quantity of Item Sold
Description of Deliverable
Universal Product Code (UPC), if applicable Price Paid per Unit
Manufacturer Name
Total Price
Manufacturer Part Number 6
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Proposed rule and the PRC • Retains Price Reduction Clause (PRC) in GSA Schedule contracts • Deletes requirement to monitor basis of award (BOA) customer if report transactional data • Remaining pricing compliance requirements in effect – Commercial Sales Practices (CSP) information – Updates throughout life of the contract – Price reductions may be requested at any time
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Transactional data burden and cost • GSA estimated a reduction in annual reporting burden for contractors – Annual burden reduction approx. 750,000 hours – Annual savings $51 million
• Member Survey revealed:
• Based on survey total implementation cost is $814,700,534— 30 times GSA estimate of $24 million 8
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“GSA can more effectively achieve its goals using methods that are less costly for industry and the Federal government.”
Public comments from The Coalition for Government Procurement GSAR Case 2013-G504, Transactional Data Reporting May 4, 2015
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Commercial Market Initiative
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Why an Alternative? • Transactional data as described in the proposed rule creates higher MAS program costs for government and industry – Inconsistent with FAS initiatives to lower contract pricing/costs
• Dynamic market-based model an alternative – – – –
Put commercial back in commercial item contracting Increase efficiency Reduce market barriers for businesses of all sizes Increase access to innovation 11
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The Alternative – Straw-Man • Online Federal catalogue – Posts products and services at real-time competitive prices for products and services (labor or service rates) – Simplified terms and conditions accepted at purchase • Creates Basic Ordering Agreement (BOA)
– Open to all eligible ordering activities – Offers Best Competitive Pricing – Supports customer requirements to follow FAR 8.4 ordering procedures – Opportunity to notify vendor of intent to purchase at high volume and request a quote 12
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Alternative within GSA Authority • Within already existing authority for Schedules program • Federal Property and Administrative Services Act of 1949 • 41 U.S.C. 259(b)(3) – Program participation must be open to all responsible sources – Orders and contracts result in lowest overall cost alternative to meet Government’s needs
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Benefits • Dynamic competitive market for commercial items – Market driven pricing – Greater access to commercial innovation across industries – Reduced lead times for new entrants and items – Increased competition
• Terms and conditions aligned with commercial practices, as much as possible, to maximize best value 14
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Recommended Pilot • Develop using existing commercial tools through 18F • Voluntary pilot for limited Schedules • Simplified terms and conditions • Measure pilot success based on: – Total Acquisition Cost • Cost of pilot participation vs current Schedules program (government and industry) • Compare administrative, bid & proposal and compliance costs, and pricing
– Survey • Customer agencies • Contractors 15
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Discussion • What suggestions do you have on the Commercial Market Initiative? • What is the appropriate role of transactional data? • What can be done to reduce Contract Duplication? • How can the processing time for modifications be reduced? • Any additional ideas for GSA to improve its government-wide contract vehicles (MAS program and GWACs)? 16
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Thank you
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Keynote: The Need for Acquisition Reform
• Jack Gansler – Former Undersecretary of Defense for Acquisition, Technology, and Logistics
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DEFENSE ACQUISITION REFORM October 22, 2015
THE HONORABLE JACQUES GANSLER THE GANSLER GROUP
Click to edit Master subtitle style 1320 Old Chain Bridge Road Suite442 McLean, Virginia 22101 703-442-5200
SOLUTIONS FOR GOVERNMENT AND INDUSTRY
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The Gansler Group
The Current National Security Challenge • DoD budgets and force structure cuts (to help with US deficit) • Worsening worldwide security environment (including cyber security – yet increasing cyber dependence) • Decline in emphasis on research funding (but no longer the leader in many areas) • Weapons costing more and taking longer (but numbers matter for total force effectiveness) • Growing legislation and regulation on acquisitions (which raises costs and creates barriers to change) • Acquisition policies and practices based on buying goods (but over 60% of the dollars go to services)
The Gansler Group
Shrinking and Uncertain Defense Budgets and Declining Force Structures
[Source: Center for Strategic and International Studies (CSIS)].
The Gansler Group
The State of Global Security*
* Source: Exelis Analysis (2013)
The Gansler Group
Cyber Security Vulnerability in “Information Age” • Financial Institutions • Health Care Institutions
• Transportation Systems • Communication Systems • Power Grids
• Weapon Systems (manned and unmanned) • Government Organizations • Individuals (computers and smart phones • Commercial Firms
CONCERNS: Privacy, financial, criminal, competitive
The Gansler Group
The Gansler Group
DoD Vulnerability Not Just in Equipment but Also in Services
• Services now are over 60%of expenditures and mission – critical (e.g. logistics)* • Many DoD services are cyber-dependent
* In the Sinai War Israel ran out of bullets
The Gansler Group
DoD Logistics (the Highest-cost acquisition area) is not “World Class” •
Not a single, integrated, secure IT System (current estimate is approximately 2000 individual systems)
•
Does not provide total asset visibility (as FedEx and UPS do)
•
50% of maintenance is legislatively mandated as sole-source (depots)
•
Does not provide adequate inventory visibility* - Over 1/3 of the stored munitions at Letterkenny are obsolete -Army lost track of $5.8 billion of supplies, between 2003-2011 -”DLA has about $14 billion of inventory, and probably half is excess to what we need” (V. Adm. Harnitcheck {2013})
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Air Force’s Expeditionary Combat Support System cost $1.03 billion, between 2005 and 20012; but then was cancelled**
*Source: Scott Paltrow “Unaccountable,” Reuters (November 18, 2013) **The problems (according t an A.F. internal inquiry were “muddled governance, ineffective change management, and revolving door leadership,” Sean Reilly, Federal Times, December 2, 2013
The Gansler Group
An Awakening Act (regarding cybersecurity) • In 2015, the Office of Personnel Management (OPM) was hacked • Records of 5.6 million people were taken (current and former government employees) • DATA INCLUDED: Fingerprints, social security numbers, information provided in obtaining security clearance, etc.
The Gansler Group
Problems in DoD DoD’s Acquisitions Caused Increased Regulation and Oversight Increasing Costs and Driving Away Commercial Firms
OMB and SBA estimated Regulatory Compliance costs of $1.752 trillion in 2008 (up from $1.1 trillion in 2005 and $843 billion in 2001)** Note 1: That the sum of corp. tax and individual taxes in 2011 was $1.402 trillion (far less than the estimated regulatory compliance costs). Note 2: The TASC/Coopers and Lybrand study of the 18% “regulatory cost impact on DoD purchases” was done in 1994. A 2014 Air Force report said the regulatory cost increase is now 25%.
The Gansler Group
Historic Example of potential benefits: at the Parts level: Commercial Vs. Military Semiconductors For Same Environment and Performance COMMERCIAL
MIL SPEC
PART COST Bi-polar digital logic
$1.67
$15.78
Bi-polar linear
$0.42
$11.40
0.06
1.9 – 4.6
RELIABILITY FAILURE INDEX (ppm) LEAD TIME NEW PART
1-12 months
17-51 months
After seeing this (and other comparable data) on the “Packard Commission”, Defense Secretary Perry issued a Directive for DoD to “use Commercial Specs and Standards” (which has not been followed) *Sources: “A Quest for Excellence”-“The President‘s Blue Ribbon Commission Defense Acquisition;” (from Packard Commission), June 1986
The Gansler Group
Joint Direct Attack Munition (JDAM)
The Gansler Group
Examples of U.S. Legislative, Regulatory, Policy and Practices “Barriers” to Civil/Military Industrial Integration • • • • • • •
“Specialized” (government unique) cost accounting requirements Export Controls (including on sub-contracts) Loss of Intellectual Property Extensive Oversight and auditing 50% Depot law (on maintenance and “core” work) Legislative Elimination of Public/Private competitions Extensive reports required - - including on sub-contractors (e.g. on finance, quality and manpower) • Insufficient education of buyers and Program Managers (e.g. on “buying commercial” (FAR part12, FASA, OTA, etc.) and on industry incentives). • Growing Focus on Low Price vs. “Best Value” • “Buy American” legislation Continued on next slide
The Gansler Group
Examples of U.S. Legislative, Regulatory, Policy and Practices “Barriers” to Civil/Military Industrial Integration (continued) • • • • • • • • •
“Compliance culture” (fear of risk) Socio-Economic Requirements Security Requirements Budget and Market annual uncertainties Unique military specifications “Conflict minerals” prohibitions Contract Finance/Payments laws Mandated low profit margins on sales to government Push for more “insourcing”
These “barriers” must be lowered and/or removed! NOTE: “Better Buyer Power 3.0” says: “remove barriers to buying commercial
“ and President Xi (in China) is pushing for greater Civil/Military Industrial Integration.
The Gansler Group
Research Funding Trends* (critical for Economic Competitiveness and Security Technological Leadership)
*Sources: Top Fig.: David Mowery “ Military R&D and Innovation” (University of California Press, 2007); Lower Fig.: National Science Foundation, S&E Indicators 2006; OECD, Main S&T Indicators database, Nov. 2004
The Gansler Group
R&D Outlays as a share of total federal budget, 1968-2015
The Gansler Group
MIT / Future Postponed
The Gansler Group
Two Examples of US Loss of Global Leadership in Critical Security Technologies
Night Vision Devices French are ahead (per Army Night Vision Lab)
Vehicle Armor We recently chose Israel’s Armor, and they are setting up a US facility
The Gansler Group
Summary Statements on the Environment • Perhaps the biggest national security concern is the US economy – former Chairman Joint Chiefs of Staff: “America’s #1 National Security Threat is the Deficit.” • Regarding the Security Environment – former Director of National Intelligence: “More Challenges Today than We Have Had in the last 50 Years.” • In terms of the combined economic and security environment – a senior military officer in the intelligence field: “the controlling concern we have today is uncertainty.”
The Gansler Group
Summary of Current Security Issues • DoD Budget Cuts (to help with US deficit) • Changing Worldwide Security Environment
• Growing Cyber Security Concerns • Growing DoD dependence on cyber • Growing Legislation - raising costs and turning away
commercial firms • Decline in DoD Emphasis on Research • US no Longer Leads the World in Many Critical Technologies EACH OF THESE MUST BE ADDRESSED (cyber security through sharing of information on attacks
The Gansler Group
The Security Needs, Therefore, Are • Do more with less – and recognize that “even how much more” is uncertain. • Respond much faster – to the rapidly-changing and uncertain threat environment. • Maintain technological leadership – in all areas (e.g. cybersecurity, nanotechnology, robotics, renewable energy, low cost manufacturing and in intelligence from “Big Data Analytics”); while recognizing that technology, industry, and labor today are globalized and, in many areas, the technological leadership exists in commercial or foreign firms, not in DoD. Yet, DoD desires domestic production.
The Gansler Group
Four Key Parts of the Acquisition Process • What do we buy (the “Requirements Process”) • How do we buy (the “Acquisition Process”)
• Who does the buying (the “Acquisition Workforce”) • How do we support the force and the equipment and who does it (the “Support Process”) THESE FOUR ARE INTERRELATED – AND ALL FOUR MUST BE ADDRESSED TO DO MORE WITH LESS
The Gansler Group
Where Do Key Innovations Come From?
The Gansler Group
DoD Investment In Innovation is Critical
The Gansler Group
The Acquisition Workforce is Critical • It has been greatly undervalued
• The FY96 DoD Authorization Act required a 25% cut (then the acquisition budget exploded after 9-11-01) • A 2015 Defense Science Board study found the 55% of the DoD Acquisition Workforce had less than 5 years of experience (and the senior people had all retired)
The Gansler Group
To Get More For Less Requires Change The data show that institutional change (“Cultural Change”) requires: 1. Widespread recognition of the need for change 2. A leader with a vision, a strategy, and actions to achieve the needed change FORTUNATELY, BOTH THE HOUSE AND SENATE ARMED SERVICES COMMITTEES NOW HAVE ACQUISITION REFORM BILLS BEFORE THE CONGRESS AND BOTH STRESS THE ACQUISITION WORKFORCE – SO THE NEED FOR CHANGE IS CLEARLY RECOGNIZED
The Gansler Group
Summary of Current Needs Regarding Defense Industrial Base “The last two decades have seen a consolidation of the Defense Industry around 20th Century Needs – the next step is DoD leadership in transforming to a 21st Century National Security Industrial Structure.” (DSB Report on 21st Century Defense Industry, 2008)
TRANSFORMATION TO FOCUS ON: • • • • •
Affordability (procurement and life cycle costs) Responsiveness (government and industry Government Gain benefits of commercial and global Maintaining “Technological Superiority” Assuring the incentives from competition (at all levels, and for all non-governmental work)
The Gansler Group
Benefits of Civil/Military Industrial Integration Economies-of-scale:
Higher volume from “dual use”- therefore lower cost goods and services for commercial and military (e.g. Boeing transports)
Technology (product and process) transfer (“spin on” and “spin off”) • • •
Civil competitive market emphasis on cost and reliability Civil emphasis on “rapid availability” Civil can take advantage of large R&D investments in defense and defense can take advantage of even larger civil R&D investments
Accelerated Commercialization:
US security strategy is “technological superiority: and its large, annual procurement budget provides a “first buyer”
Greater Competition for DoD: Encouraging civilian oriented firms to enter DoD market expands competitive environment (especially at the lower tiers)
The Gansler Group
This is a Critical Period • •
•
•
Similar to the period following the launch of sputnik or the fall of the Berlin Wall Today the security world is changing dramatically (geopolitically, technologically, threats, missions, war fighting, commercially, etc.). A holistic perspective is required (including STATE, Homeland Security, and National Intelligence, as well as coalition operations) Moreover, a decade of solid budget growth (after 9-11-01) – which has clearly changed – deferred difficult choices (more 20th Century equipment vs. 21st Century equipment. Also shifting to “world class” logistics support). However, the controlling acquisition policies, practices, laws, etc. and the Services’ budgets and “requirements” priorities have not been transformed sufficiently to match the needs of this new world. The emphasis is on “resetting” vs. “modernization;” and on “preserving” the industrial base vs. “transforming” it. LEADERSHIP FROM EXECUTIVE AND LEGISLATIVE BRANCHES IS REQUIRED TO ACHIEVE THE NEEDED CHANGES
Legislative Reform – What to Expect from the Hill • Troy Cribb – Senate Homeland Security & Government Affairs Committee • Emily Murphy – House Small Business Committee • Arun Seraphin – Senate Armed Services Committee • Moderator: Jon Etherton- President, Etherton & Associates 48
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Break
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Executive Agencies – Leading Acquisition Change • Soraya Correa – Chief Procurement Officer, DHS • Major General Casey Blake – Deputy Assistant Secretary for Contracting, Office of the Assistant Secretary, Air Force Acquisition • Gregory Giddens – Principal Executive Director, Office of Acquisition, Logistics, and Construction, VA • Moderator: Bill Hilsman – Booz Allen Hamilton 50
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Business Outlook – New Opportunities, New Challenges • Brian Friel – Senior Contracts Analyst, Bloomberg Government • Cameron Leuthy – Senior Budget Analyst, Bloomberg Government • Tiffany Hixson – Regional Commissioner, GSA • Moderator: Bill Gormley - President, The Gormley Group
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Break
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Acquisition Reform Discussion and Brainstorming • Francis Rose, Anchor – In Depth, Federal News Radio • Roger Waldron, President – The Coalition for Government Procurement
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Discussion and Brainstorming • What suggestions do you have on the Commercial Market Initiative? • What is the appropriate role of transactional data? • What can be done to reduce Contract Duplication? • How can the processing time for modifications be reduced? • Any additional ideas for GSA to improve its government-wide contract vehicles (MAS program and GWACs)? 54
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Myth Buster Breakout Sessions Session 1, 2:15pm - 3:30pm
Speakers
DOD Update
John Tenaglia, DoD; Mike Canales, DoD
Doing Business with the VA
Elegear Primus, VA; Craig Robinson, VA; David Elizalde, VA
Doing Business with DHS
Harrison Smith, DHS; Jackie Smyth, DHS; David Grant, DHS
Alliant 2 Updates
Casey Kelley, GSA; John Cavadias, GSA; Richard Blake, GSA
Session 2, 3:45pm - 5:00pm
Speakers
GSA and VA Schedules Modernization
Robert Bourne, GSA; Craig Robinson, VA; Mark Lee, GSA; Greg Rollins, GSA
The GSA Acquisition Centers
Shaloy Castle-Higgins, GSA; Kim Kittrell, GSA; Peter Han, GSA; Brian Knapp, GSA; Ralph Lentz, GSA
Update on Government-wide IT Acquisitions
Darlene Coen, NASA; Robert Coen, NIH; Kay Ely, GSA; Christopher Fornecker, GSA See the Conference program for more details 55
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5:00 - 6:00 Networking Reception
Please Join Us In The Main Foyer For A Networking Reception!
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