|
Happy Groundhog Day! Whether Punxsutawny Phil sees his shadow today or not, we're all looking at about six more weeks of continuing resolutions, which is a different kind of winter of the soul.
Last week's Defense Innovation Board meeting discussed two recently completed studies, "Lowering Barriers to Innovation" and "Building a DoD Data Economy." Both studies foreground the key role contracting plays.
Many of the recommendations in lowering barriers to innovation look to bring defense contracting in line with private sector practices and to simplify processes. Some recommendations:
- Create a continuous authority to operate (ATO) software strategy and allow reciprocity for acquisition of Software as a Service in approved cloud environments across the department.
- Limit RFPs to three pages or less.
- Require RFPs to include criteria for contractor demonstrations.
- Transition from time and material contracts to more firm fixed price contracts.
The data study calls for two contracting recommendations:
- Create a new requirement in the FY 2025 NDAA for all DoD vendor agreements to incorporate clear language on data rights and interoperability that manages data procured or generated under defense industrial contracts, and that facilitates, safeguards, and future-proofs DoD’s access to this data.
- Update contract incentives by, for example, shifting significant profit opportunities away from maintaining legacy software to continually improving software based on data feedback.
The Office of Federal Procurement Policy issued guidance on increasing small business participation in multiple-award contracts. As writer Ross Wilkers points out, over half of all contracting awards occur on large vehicles now, and the trend only looks to continue. Some of OFPP's guidance: Apply the rule of two to task orders, and set aside for small businesses all orders under the simplified acquisition threshold.
DoD has issued a call for white papers as part of its rollout of the Distributed Bioindustrial Manufacturing Investment Program (DBMIP), an effort that will be executed with the newly established Defense Industrial Base Consortium Other Transaction Agreement. The effort is shared by both A&S and R&E, and it begins implementation of the National Defense Industrial Strategy. From Dr. LaPlante:
- "The DIBC OTA helps enable more rapid execution of Defense Production Act funding and can also allow for other federal agencies with similar investments to separately or jointly invest in projects awarded by DoD."
Christine Michienzi writes about the admirable goals behind the National Defense Industrial Strategy while noting the challenge of unifying the many and diverse players around this shared vision.
- Want to hear more of her thoughts on the topic? She'll be discussing the state of the defense industrial base on a plenary panel at our symposium in May.
A group of lawmakers is calling for a national maritime strategy that brings together military, civil, and commercial shipbuilding and determine these industries as “critical infrastructure sectors."
Our top story covers last week's earnings call, during which several CEOs of big defense contractors admitted that they are taking losses on contracts with DoD, especially on firm fixed-price contracts. As Lockheed Martin CEO Jim Taiclet said, this means his company is no longer willing to do whatever it takes just to work with DoD. He's not alone. Northrup Grumman CEO Kathy Warden shared that her company has "passed on some high-profile programs as a result of the risk balance that the customer put forward."
RAND has released their reports conducted for the PPBE Reform Commission evaluating PPBE in comparable organizations: Russia and China, allies and partners, and other U.S. federal agencies. This research sheds insight on what the PPBE commissioners are considering as they finalize their report due out next month.
- We'll be hearing from some of those commissioners at our symposium. There will also be a separate panel with RAND researchers discussing these findings. Read their reports now and jot down your questions to ask when you see the team in person!
In ARP news, our latest student research was conducted in collaboration with DIU to identify solutions that simplify the complex industrial facility clearance process. They presented their findings at the DIU Facility Clearance Modernization Summit in November, to much acclaim. Their research intersects with recommendations from the Defense Innovation Board, which also identified security clearances as substantial barriers to entry.
Program is posted online!
Register now to join us for this action-packed two-day event.
This Week's Top Story
No more ‘must-wins’: Defense firms growing warier of fixed-price deals
Stephen Losey and Noah Robertson, Defense News
Lockheed Martin chief executive Jim Taiclet offered a warning during a quarterly earnings call this week,
The government, he said, is putting too much risk on defense companies by flexing its muscle as the sole buyer of military hardware, and his firm is changing its approach.
“We don’t have any must-win programs with Lockheed Martin anymore,” Taiclet said.
Taiclet was one of several defense industry executives who this week aired their angst about the government’s contracting practices. Many were particularly concerned about fixed-price contracts. Under these agreements, meant to secure the least risk for taxpayers, companies pick up the bill when costs run higher than expected. Such cases can be disastrous for defense firms — like Boeing’s $7 billion in overruns on a $4.9 billion contract for the KC-46, an Air Force tanker.
Taiclet argued that, as the defense industry’s only customer in most cases, the Pentagon has enough sway to make its suppliers accept its terms.
“Some of the competitors feel that they’re must-win programs for them, [and] that they will take tremendous risk on costs and pricing,” he said, noting that was no longer the case at Lockheed Martin. Those risks combine to result in cost overruns and delays on major programs, he said.
Taiclet said the problem exists in both fixed-price and cost-plus contracts. But, during the same call, Lockheed chief financial officer Jay Malave noted the company is now seeing an “uptick” in cost-plus contracts, which could mean less risk.
|
