POGO Comments on Proposed Reforms To Pentagon Acquisitions

April 23, 2015

Chairman Mac Thornberry

Ranking Member Adam Smith

House Armed Services Committee

2120 Rayburn House Office Building

Washington, DC 20515

Dear Chairman Thornberry and Ranking Member Smith:

The Project On Government Oversight (POGO) has spent nearly 35 years investigating waste, mismanagement, and abuse in the Department of Defense’s (DoD’s) weapons acquisition system. The Agile Acquisition to Retain Technological Edge Act (H.R. 1597) correctly assesses many causes of failures in the acquisition system, but POGO has concerns about whether some of the provisions will fix—or exacerbate—those systemic problems.

We agree with a number of provisions in the bill, including language to strengthen the acquisition workforce, increase public access to information concerning bundled contracts, and to add the Small Business Administration to the FAR Council. We are concerned, however, that many provisions of this legislation undercut some of the nascent improvements identified by the Government Accountability Office (GAO), the Department of Defense Inspector General (DoD IG), and the Defense Contract Audit Agency (DCAA). Specifically, the legislation contains provisions to weaken key officials who act as checks on program management to ensure there is complete developmental and operational testing and sound systems engineering. It also dilutes requirements designed to save money and improve performance of weapon systems through competitive prototyping and responsible use of multiyear procurement contract authority. We believe these provisions increase the likelihood of waste, schedule slippage, and performance shortfalls, and urge the Committee to further investigate these issues before initiating changes.

Below, for your consideration, is a section-by-section evaluation of provisions POGO supports and opposes.

Section 105: POGO supports strengthening the acquisition workforce through such efforts as improved training on conducting market research; however, the government should not buy goods or services based solely on market research. The government needs access to contractor cost or pricing data to speed up the buying process and to ensure that it is paying fair and reasonable prices.

Sections 106 and 705: POGO opposes the requirements for an FFRDC to study workforce improvement and bid protests. The DoD IG or GAO should be tasked to conduct these studies rather than an outside entity to prevent any conflict of interest or integrity questions.

Sections 202 and 601: POGO opposes the reduction of authority of the Deputy Assistant Secretary of Defense for Developmental Test and Evaluation and the Deputy Assistant Secretary of Defense for Systems Engineering. Numerous studies, and the findings included in the legislation, show that sound and robust systems engineering and developmental testing are key components to the success of major defense acquisition programs. Moreover, these offices provide reports that play an important role in effective congressional oversight and public scrutiny of weapons programs.

Section 204: POGO opposes language to reduce the use of competitive prototypes in acquisition. Congress should be increasing pressure on the Department to use genuinely competitive prototypes to reduce costs and improve performance.

Section 301: POGO is glad this bill includes a mandate to issue service contracting guidance; however, Congress should not tolerate DoD’s decade-long effort to drag its feet on this issue. Last year, DoD offices terminated efforts to improve the use of contractor inventories and failed to establish the Total Force Management Support Office. The Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics and the Personnel and Readiness Office should be held accountable for not taking service contracting seriously. Congress and DoD should be promoting systems that will save money and allow for well-informed budgetary and readiness decisions. POGO also urges the Committee to statutorily require in 10 USC § 2330a that the Army’s “Request for Services Contract Approval Form” be used DoD-wide to determine appropriate workforce mix as required under 10 USC § 129a.

Section 503: POGO supports public access to information on bundled contracts. Combining requirements harms competition, which can result in increased prices and poor performance.

Section 601: POGO is concerned that this provision’s elimination of some reports—particularly reports tracking development and production of Littoral Combat Ship mission modules, cost assessments of the CVN-79, and cost analyses reports—reduces Congress’s ability to oversee specific high-risk programs and to assess weapon system program risks across the Department.

Section 701: POGO opposes this provision. As we have written before, we are very concerned that adding cost and schedule considerations to DOT&E’s operations will undermine the office's effectiveness and increase the risk of cost overruns, performance shortfalls, and schedule delays.[1]

Section 704: POGO supports the Committee’s mandate to place the Administrator of the Small Business Administration on the FAR Council. This addition to the Council should help protect small business interests.

Section 706: We strongly support the plan to establish an expert staff tasked with making commercial item determinations, and making those determinations public. You should consider merging this office with DoD’s existing cost and pricing offices to ensure consistent application of commercial item designations and pricing. POGO would ask for clarification on whether the language is intended to make the determinations public on a website, similar to how sole source justifications and approvals are made available, or to merely make them public via a FOIA request. POGO would fully support the proactive disclosure on a website.

Section 707: POGO opposes weakening the already permissive requirements for multiyear procurement and believes this change will create significant cost risks and increase the likelihood of committing the Department to immature, risky programs. A 2008 GAO study examining past instances of multiyear procurement authority found unit cost growth actually increased 10 to 30 percent.[2] The Committee should ask the GAO to study whether multiyear procurement does result in savings and consider whether further restrictions to this authority are needed.

Section 708: The proposal to use recent prices paid by the government in the determination of price reasonableness will harm the government and severely limit the government from accessing any cost or pricing information from contractors selling commercial goods or services. Historic pricing data is insufficient to determine fair and reasonable prices and will result in new bad deals being made based on old bad deals.

Section 709: POGO supports the position of limiting the use of other transaction authority to innovative small businesses and nontraditional contractors, which embraces the intent of that authority.[3]

Section 710: POGO does not support raising the simplified acquisition threshold to $500,000, but supports raising the micro-purchase threshold to $5,000 based on improvements in purchase card spending. Such a dramatic increase in the simplified acquisition threshold could result in rushed procurements and wasteful spending. Considering the inflation adjustments in Section 711, POGO would support setting the simplified acquisition threshold at $250,000.

We appreciate your consideration and attention to reforming the Department of Defense’s acquisition system and would welcome an opportunity to meet with you or your staff to discuss these issues. Please contact Scott Amey, POGO’s General Counsel, or Mandy Smithberger, the Director of the Straus Military Reform Project, at 202-347-1122 for more information.

Sincerely,

Danielle Brian

Executive Director

cc: Senator John McCain, Chairman, Senate Armed Services Committee

Senator Jack Reed, Ranking Member, Senate Armed Services Committee

Members of the House and Senate Armed Services Committees

[1] “POGO Calls on Senate to Keep Pentagon Testing Office Strong in NDAA,” May 16, 2014.

[2] Government Accountability Office, Defense Acquisitions: DoD’s Practices and Process for Multiyear Procurement Should Be Improved, February 2008, Executive Summary.

[3] “Written Testimony of POGO’s Danielle Brian on DoD’s Use of ‘Commercial’ Acquisition and ‘Other Transaction Authority’ before the Senate Armed Services Committee, Airland Subcommittee,” March 15, 2005.